" Because the UN has not insisted that Jerusalem retain its proposed international status, since Israel seized W J`sem. Therefore the status quo changed to Israel = West, Jordan = East. UNSCR 242 recognises that and ties it up legally: it doesn`t say anything about Israel vacating W J`sem - but it does stipulate that it must withdraw from territories occupied in 1967." Jordan isn't interested in the territories any longer. Nothing says that Israel must withdraw from E. Jerusalem.
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Mideast Quartet will prepare report end of escalation, two-state solution (Haaretz)
from the article: IDF official: Neither Israel nor PA wants violence