You are right that peace is not in Israel's perceived interest. But the illusion that we are working toward peace is valuable to the USA. So the longer that Mitchell can make it look like there could be some possibility for peace, the better it is for the USA. He is not wasting your tax dollars to do his best to work toward peace even if peace is actually impossible because of Israeli policies. At some point it might be useful to pretend to "punish" Israel for those policies. We could for example cut off the official aid to Israel, replacing it completely with under-the-counter aid. We could officially revoke Israel's MFN status, and unofficially subsidise Israeli exports to the USA enough to make up for it. We could officially stop US military technology giveaways to Israel, replacing them with things that we say are smuggled. Etc. The better we can pretend we are not 100% supporting Israel in everything, the better our relations with the rest of the world.
Magnitude 4.2 quake strikes near Grand Coulee Dam in Washington (Reuters)
from the article: Hamas: Abbas selling Palestinians illusions of peace with Israel