There is no reason to compromise on Jerusalem at all. Israel needs to recognize the difference between Jerusalem and Abu Dis and act accordingly. The line of division should be extended north and south from the historical line between Abu Dis and Jerusalem. From there, the Israelis can negotiaite with the Palestinians if they want more.
Israel Air Force strikes four targets in northern Gaza Strip (Haaretz)
from the article: Palestinian Authority: Israel must choose - peace or settlements