If reports of the details of the agreement are accurate, then the Palestinian Arabs will find that a second Palestinian state is not going to be handed to them on a silver platter:
This is not just an issue of the Palestinians not being able to just sit back and let the US do all of the work for them. There is also the issue of Obama's image in the eyes of the Arab world in general and the Palestinian Arabs in particular. The Palestinians seem to view things as black and white. If they see this as a real concession by Obama to Israel, then the credibility he is trying to build with the Arab world will be diminished.
Israel and the United States have reached a deal allowing the Jewish state to build about 2,500 housing units already under construction in West Bank settlements, a newspaper reported on Wednesday.
The agreement was secured during a meeting between Israeli Defence Minister Ehud Barak and US Middle East envoy George Mitchell on Monday, said the Maariv newspaper, quoting unnamed sources [Hebrew link].
Under the arrangement, Israel would be allowed to continue work on about 700 buildings already under construction on the occupied Palestinian territory, or about 2,500 units.
If confirmed, the deal would go counter to repeated demands by the administration of US President Barack Obama for Israel to stop all activity in the settlements, which the international community considers illegal and which are one of the major obstacles in the hobbled Middle East peace process.
But not only is the US not going to do all of the work--the Palestinians and the Arab world are going to be required to actually negotiate:
Barak and Mitchell reportedly agreed that a halt to settlement construction would come only within the framework of regional peace negotiations that would also involve Syria and Lebanon.
"In other words, the Americans have adopted the position that Israel should not be required to halt settlement construction as a precondition, but rather only when the peace process with the Arab countries and the Palestinian Authority gets on track," the Maariv said.
...Among steps required for a peace deal, they listed Palestinian action on security, moves by Arab states towards normalisation of ties with Israel and Israeli measures on settlements and on access and movement in the West Bank.
Israeli government spokesman Mark Regev said that the actual details have not actually been arrived at. It remains to be seen if what has been reported is accurate and if the US will be willing to apply the same kind of pressure on the Arabs as it has on Israel.
That would explain the article in YnetNews.com:
Minister: Barak-Mitchell talks 'huge flop'
Defense minister briefs senior cabinet members on London meeting with Obama's Mideast envoy; one of them quoted as saying Barak 'offered dismantling of illegal West Bank outposts in exchange for nothing'
"(Defense Minister Ehud) Barak returned with nothing from his talks with (special US Mideast envoy) George Mitchell; it appears that he offered the dismantling of illegal West Bank outposts in exchange for nothing," a senior minister said Tuesday.
The minister, who asked to remain nameless, was also quoted by his associates as saying, "The inclusion of Syria and Lebanon in the statement on a comprehensive peace agreement that followed the (Barak-Mitchell) meeting is a huge flop."
UPDATE: Check out Israel Matzav on what is not mentioned as part of the freeze:
Note that there is no mention of the other open issues on the freeze: The Americans were demanding that it include Jerusalem and the freeze's length is not discussed. It is also not clear whether these 700 buildings are only in the 'settlement blocs' or also in other parts of Judea and Samaria.
UPDATE II: More negative reaction to the news:
However, “this news is far from good, and is in fact very grave,” said the Chairman of the Council of Jewish Communities in Judea and Samaria, Danny DayanAnd this is before any word whether news of this is accurate!
"It is nothing more than a trick," he told Israel National News. “Everyone knows it’s impossible to stop construction that has already started. These buildings are not being put up by the government; they are all private construction. There is no legal way to stop private construction. I therefore suspect that Barak released this news as if it was a great achievement because he is preparing the way for a major construction freeze in the future. This is not good news at all."