That is a classical British strategy you are describing. Just look around the world. Two thirds of it is made by Brits including Israel and Palestinians and Afghans and Iraqis. If it works so well for Brits it should for Israelis.
Lieberman: Knesset panel should review attack on IDF soldier in Nabi Saleh (Haaretz)
from the article: U.S.: Only Israel, Palestinians should decide Jerusalem's future