A declaration of statehood would not resolve all issues, but as long as it is recgnized by existing states - as it would be - it would shift the nature of negotiations radically. A state need not be in full control over its land at the time time of the declaration. Many states, including the US, were not in control of all of their territory at the time of the declaration. If Palestine were to immediately sign the Geneva Conventions, assure the world that this is not a declaration of war nor the initiation of an ethnic cleansing campaign, there would be very little Israel could do. Israel would probably try to annex the WB immediately, but if even one state has already reognized Palestine, such annexation would be unlawful. If Israel responded by starting a war, the UN could and would intervene. Even the US would be hard pressed to support any such war or annexation.
4 UN peacekeepers injured in Sinai and taken to hospital in south Israel (Haaretz)
from the article: Abbas must unilaterally declare Palestinian state