-Cue to Nathan, who can explain why there's a silver lining here...
On Israel, there is probably the least argument for differences between the parties, largely due to the heavy Jewish participation in Democratic primaries. One reason US policy is so bad on Israel is that each party is supportive of it for different reasons- the Dems because of a strong Jewish base in progressive organizations generally and electorally in Dem strongholds like New York and California, the GOP because of Christian fundamentalism and Nixonian realpolitick int he region.
Still, despite Max's hypothetical, the reality has been that peace has done better under Carter and then Clinton than under Reagan, when the first intifada spiralled up out of the complete oppression of the Palestians. Bush Senior deserves credit for moving away from Reagan's absolute disregard for Palestinian concerns. But it was under Clinton that the PA expanded and the worst repression by Israel ended, until negotiations spun out of control late last year leading to the most recent rounds of violence. And the GOP as a party has been much more supportive of the Likud.
And to the extent that international institutions have mattered in the conflict, in supporting the PA and seeking to broker peace, the Dems are far more supportive of funding them than the GOP, so that is indirect support for peace even where explicit calls by Dems are against the Palestinians. As I said, the differences are not that strong but they are discernible and, unlike Max, I think they are still positive with the Dems, despite the Northeast Dems (who are most hawkish on the issue given their constituencies.)
I am actually not as pessimistic as some folks, maybe because I was in Isreal and the PA just a bit before the most recent conflict and saw how many folks really were yearning for peace, even if they couldn't cross the final threshhold. A friend (an Iraqi Jew) once noted that folks outside the region don't recognize how much conflict always precedes compromise among the Jews and Palestinians. She told a story of how folks negotiated how much a window would be open on a bus in Israel-- one person would slam it open, one would slam it shut, and somehow they'd eventually settle on it partly being open. But it was never pretty.
The destruction of the PA will slow down peace negotiations but if it forces the reoccupation of the West Bank without Arafat's assistance, that will be very bad for Israel. Europe has already applied trade sanctions to all goods coming out of the settlements. They are very primed to escalate economic sanctions further. So Sharon may threaten the PA's destruction as a negotiating tactic, but it's not one he will probably want to use.
-- Nathan Newman