I think that if you look at actual battle lines, you will see that Arab troops repeatedly entered into the Israeli territories.

Please provide documentation for this.

And recall that Rabin was assassinated because of his willingness to compromise with the Palestinians.

How can one forget that?

It still seems that Arafat must make the initial overtures, not necessarily out of any moral obligation, but simple recognition of the fact that, while his power base seems fairly stable, Israeli Prime Ministers have very little stability of support.

Arafat has made many overtures. Israel has reneged on all of the agreements it has made with the Palestinians.   Nothing constructive will happen in Israel/Palestine until Israel gives up it's agenda of permanently removing all of the Palestinians from Israel and the occupied territories, or until it succeeds in removing them (or killing them, or scaring them away, or by making their lives so bloody miserable, they'll leave on their own).

Of course, if it does succeed in getting rid of all of them, that will still not guarantee security for Israel, because there will always be people who will not be happy about this ethnic cleansing, and who might want to express their displeasure in ways that Israelis might not like. Israel just keeps digging itself deeper and deeper into a hole that it doesn't like being in at all. Not at all unlike what the US is doing.