"It seems a bit odd that the Israeli government should view a formal assertion of a Palestine state within 1967 borders as something to worry about. After all, that would seem to involve a retreat from the position which has increasingly been voiced, that, in face of the refusal of Israel to negotiate the setting up of such a separate Palestinian state, it is time to abandon that ambition in favour of a state made up of Israel together with the West Bank and Gaza, with equal rights for all its residents."

Personally I agree with you about the single state, but the impetus, if there is any, seems to be going the other way. I think you're slightly conflating two things here. The declaration of a state in September, whether it mentions borders or not, will have no teeth. I don't think it need worry Israel at all because they know it will be a state in name only, and an uprising resulting from Palestinian frustration at that will suit Israel very nicely. What Israel will not tolerate is a state with settled pre-67 borders. Obama is in cloud-cuckoo land if he thinks that's anywhere near, and the Israelis know it. It's talk, no more, and we've been there before.