Obama already had a clear demonstration that a "freeze minus Jerusalem" does not get him where he wants to go. Therefore he needed to induce Israel to go that one step further, and that's why the package was so over-the-top generous. Bibi wanted to rewrite the offer so that he got the goodies without having to do what was needed to EARN those goodies, and that was always going to be too greedy even for the Americans to swallow.
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Some 100 protesting in Jerusalem against new civics curriculum (Haaretz)