The Palestinians want Jerusalem as a capital because it is their biggest city and it is the economic heart and connection to the international world. Much of their economy has suffered since being cut off from the city. These are the reasons that states declare capitals where they do. If the Palestinians could access Jerusalem, live there, and trade freely, I'm sure they could be convinced to give up on the capital-city claim for awhile. It's only used to try to keep this resourceful city and its people in the negotiations for them. Israel, however, sees Jerusalem as a gateway and lever to it's establishment of their state in the West Bank. I think Yossi's analysis is sober and realistic.
Palestinian man suffers light wounds from rocks thrown by Jewish men in Jerusalem (Haaretz)
from the article: Israel should give up Jerusalem as its capital