The conditions of their proposal are pragmatic, and despite the appearance of being stubborn demands, the conditions are also placed on themselves in the sense that they fully recognize that for peace to be stable, and for normalized relations to be achieved, the sources of popular antagonism towards Israel in the region must be removed. It has to be a peace between peoples; not just governments. And along with that, they also recognize that the alleviation of antogonism toward Israel would also serve to stabilize the region and minimize the ability of radicals, which are just as much a threat to them as they to Israel, to recruit and operate. Meanwhile, Israel 'peace' with is Egypt is so dependent on Mubarak because it was a peace between governments, not between people. And as long as it remains as such, it will continue to be tenuous at best. If the Arab proposal had been made 30 years ago, when Egypt and Israel made peace, and if Israel had accepted it, the ME today would most likely be similar to western Europe, relatively close interrelations, economic and cultural exchange, security cooperation, tourism, et al. No doubt it would have been slow at first, just as it would today, but once it began it would progress quickly. Why should Israel consider the Arab proposal a priority? Because peace/friendship between peoples doesn't disappear with a change of leadership or regime. Not only would it bring normalized relations between Israel and its neighbors, but it would provide for the interaction between populations that tend to remove stereotypes and stigma, and provide for peaceful and cooperative coexistence.
from the article: Prayer for the health of the rais