Netanyahu knows very well that The Palestinians cannot (and should not) recognize Israel as a "Jewish State", while the meaning of the term is not clear to everyone. This is Netanyahu's way to "look better" in the US. It is merely a PR gimmick. But the Palestinians should take advantage of the situation. They probably understand that until the US Congressional elections (in 3 weeks), Obama cannot pressure Israel for political reasons. They should play the Netanyahu game of delay for 3 more weeks, maintaining the appearance that the peace talks are not actually broken so that Obama does not look like having failed. After the elections, it can be assumed that Obama will start applying real pressure on the Israeli Yahoos. Make him look good now, and you will be repaid with interest later.
U.S., allies stage 20 strikes against Islamic State in Iraq (Reuters)
from the article: Netanyahu asking Palestinians to cede right of return