There are 200,000 settlers if you leave out East Jersusalem.
That correct. Im just quoting from the page I linked to, which seems to be fair to both sides.
In the West Bank, there are 206,000 Israeli settlers and 2 million Palestinians, although settlements, adjacent confiscated land, settlement roads and other land controlled by the IDF cover 59 percent of the area.
I also found an interesting quote on that page:
Every time I have gone to Israel in connection with the peace process on each of my trips I have been met with the announcement of new settlement activity. This does violate United States policy. It is the first thing that Arabs--Arab governments--the first thing that Palestinians in the territories--whose situation is really quite desperate--the first thing they raise when we talk to them. I don't think there is any greater obstacle to peace than settlement activity that continues not only unabated but at an advanced pace.
U. S. Secretary of State James A. Baker, May 22, 1991
Like I said though, I think the issue is merely symbolical until they are both out of power. Arafat sure as hell isnt making peace and I dont think sharon would withdraw the settlements anyways.