In my view the problem is no that of creation Palestinian state. The problem is that the Palestinians want Jerusalem. But as the old saying goes: you can not have it both ways. Bibi would never allow splitting Jerusalem, because Bibi is the Mensch, unlike some Jewish Liberals who forget too quickly the history lessons.
Justice Ministry: Information examined by AG about Gal Hirsch didn't come from police (Haaretz)
from the article: Would Israel accept a state-and-a-half solution?