Nobody is "ethnically cleansing" the Palestinians. Their population is growing every year. It's not at all comparable with the situation of indians in the Americas or Jews in WW2.
I think you don't understand what "ethnic cleansing" means. It's when an ethnic group is forcibly removed from its land, usually to make way for another ethnic group to come in and settle. The settlement activity, and the Israeli annexation of the settlement blocks qualify as that.
It doesn't have to involve genocide, though that maybe a component of it. With or without genocide, it's both immoral and a crime as defined by international law.
The main reason the Palestinians don't have a state is Arafat not accepting Ehud Barak's reasonable offer, which involved huge concessions from Israel. Arafat, much like Hamas, knew that his whole existence only makes sense in a context where Palestinians are stateless, and that's why they'll never accept the compromises necessary for statehood, in effect ensuring a state of continuous conflict in which they thrive.
Israel made zero concessions. There were four principle issues in 2000:
-Removal of settlements.
-Israeli withdrawal from the occupied territories.
-Jerusalem.
-The right to return for Palestinian refugees.
On each of these issues,
international law is perfectly unambiguous:
-ALL settlement activity on occupied territory is illegal.
-Israel must give up all the occupied territories and return to the '67 borders.
-ALL of Jerusalem is occupied Palestinian territory.
-ALL Palestinian refugees have a right to, literally, return to their former homes or within the vicinity.
Now, on each of these issues it was the Palestinians that compromised:
-Israel was allowed to keep half its settlements.
-Palestinians were willing to give up a small percent of their territory.
-Palestinians agreed to divide Jerusalem into a Palestinian and an Israeli side.
-Palestinians only asked for the return of refugees in the 100s of thousands (different authors suggest anywhere between 10s of thousands to 800,000), but not the full six million for which they were entitled to ask.
That's on top of the de facto concession of 78% of Palestine they made in 1948.
It's true that from a pro-Israeli perspective, Israel made tremendous concessions during the talks. But from the perspective of international law, Israel made concessions on things they had no right to claim in the first place. That's like a store doubling its prices before selling everything on sale for half-price.
There was a second summit at
Taba where the sides almost reached an agreement on the above issues, but needed a few more weeks to finalize it. Taba held the best promise yet of ending the conflict. The reason the negotiations were stopped is largely because an Israeli election was held, forcing the government team to return to Israel; the subsequent hard-line right-wing Likud government wasn't interested in renewing talks.