The reason no "palestinian state" was ever established is beacause the arabs were more inent on removing the Jewish State. The PLO chater of 1964, well before the '67 war, was very clear in it's establishment. Article 17: The partitioning of Palestine, which took place in 1947, and the establishment of Israel are illegal and null and void, regardless of the loss of time, because they were contrary to the will of the Palestinian people and its natural right to its homeland, and were in violation of the basic principles embodied in the Charter of the United Nations, foremost among which is the right to self-determination. A reading of the PLO charter makes things very clear, one of which being that "occupation" of yesha is the smallest obstacle, considering that it was never meant to be part of the PLO's palestinian state.
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PM asked for clarification of deputy IDF chief's speech comparing Israel to 1930s Germany (Haaretz)
from the article: Condemning and discriminating