Today not only did the government of the Palestinian People launch and take credit for lobbing bombs into Israel, they also reaffirmed, via their political mantra, a desire to anhililate Israel. Your assertions are quite correct when you suggest that negotiating with these people will likely come to naught. Despite the fact that the U.S. and the E.U. are witholding funding because of the Palestinian Governments refusal to either recognize Israel as a legitimate state and/or allow for the existence of the State - they are remaining intransigent. They'd rather starve their people and have zero economic growth and/or prosperity than live side by side with the Jews of the Holy Land. From their perspective it's their land and it was stolen upon partition in 1948 while subsequent to that the Israeli army is occupying all of their country - Palestine.
In order to comprehend this fiasco in totality one has to go back to pre-partition days - to the days of the Palestinians and the Arabs taking the side of the Nazis against the Jews. That might be a beginning to comprehending the strength of their beliefs.
One thing that even comprehending the historical roots of this hatred for the Jews will not impart is what they'd ultimately do with the country were they to regain and - as much as I vehemently disagree with their cause - that's not up to us to judge. The notion that they'd allow the land to 'rot' would be up to them regardless of the nonsensical nature of such a decision to us.
What is at issue is traversing back through history to, if at all possible, gain a fuller understanding of the roots of their pathological hatred in order to in some way initiate a process, no matter how miniscule, to diffuse the situation. Failure to take that step by either or both sides and ultimately it won't matter to anyone what they'd do with and to Eretz Israel as that entity would, God Forbid, cease to exist.