On the face of it this sounds like a bluff to get Israel to seriously consider a two-state solution. The sad fact is that neither side is really interested in peace because both sides believe that if they can just stall long enough they can have it all. Worse yet, you already have a situation where the worst elements of both populations are breeding like rabbits. This would only aggravate that situation since both sides would try to achieve permanent majority status by over-breeding.
UN: At least 1,332 Iraqis killed by violence in July (AP)
from the article: Carter: Palestinians seriously weighing one-state solution