You talk about why the Israelis needs the Palestinians to do this, but you do not talk about why the Palestinians themselves have any need to do this. They don't. The Israelis have given them no reason. They can reasonably conclude from past performance that if they do this, they will merely provide political cover for more abuse of them, while they get nothing at all from the appearance of process. They can reasonably presume bad faith, based on past apparent bad faith. That is true no matter what the Israeli feel about Palestinians' own good or bad faith.
PLO official: Reports about Abbas' resignation from political life very premature (Haaretz)