The Fatah Party dominated PA wants to avoid both of them so the election can go ahead and who can blame them, they just want to participate in the Arab spring and so they have worked with Hamas to achieve this. However both Hamas and Israel are right. East Jerusalem is a legitimate part of the Palestinians state and Palestinians there should be able to vote too. And Israel has every right to ask the PA to limit candidacy to parties that work within the peace process framework that the PA itself is part of - at least until the Palestinians have full independent recognition from the UN separate from the peace process. So my advice is that Hamas says it supports a Palestinian state on 67 borders recognised by the UN and supports the PLO representative PA negotiating with Israel to achieve this goal via the terms of the peace process as well. And Hamas and Fatah agree to allow only individuals (local residents) not affiliated to either party to stand for representation in the Palestinian parliament in East Jerusalem. These representatives voting their personal support (voter numbers) in subsequent Presidential elections to choose between rival Fatah and Hamas backed candidates for this office.
Syrian PM says power crisis worsens as militants target plants (Reuters)
from the article: Hamas demands Palestinian elections be held in East Jerusalem