To elaborate just a little. First, you lose half your land. The plan the Western powers had was that the Arabs and Jews would be integrated in Israel. If you read The Source, by Michner, you find out that the Arabs were so afraid when Israel came into being that they fled. That is only partly true. Now that Israel has been in existence for over 50 years, Israeli scholars are beginning to publish about how the Arabs were turned out of the country. Many, many were given the choice of leaving or getting shot. Then you had definite second class citizen treatment for the Arabs who remained. Difficulty getting building permits, constant ID checks, etc. So the Arabs got idea that they'd wipe Israel out. The didn't work out too well for them. Eventually Israel took over supervision of what is referred to as the occupied territories. It was supposed to be a temporary thing but Israel actively encouraged settlement in the occupied territories. When Israel made peace with Egypt it was required to remove its settlements from the Negev. There was rioting in Israel. And the Negev settlements were just a patch compared to the settlements in the occupied territory. Look at the way the fence is being built. It encroaches on Palestinian land even more than the current boundary. Then you have collective punishments for the Palestinians, the fairly systematic destruction of olive trees, and the worst (or most thorough) system of checkpoints in the world. Israeli's have private roads through the occupied territories, further balkanizing them. The Arabs aren't blameless. They did attack or attempt to attack Israel, they have supported terrorists. But perhaps worst of all, no Arab nation would extend meaningful help to the Palestinians because they wanted to keep them in misery to create pressure on Israel.
As to suicide bombers, ask yourself what other tools the Palestinians have. On the Palestinian side you have a small number of fanatics engaging in terror. On the Israeli side, you have a national government engaging in what I would consider terror. Suicide bombers continue to work because Israel continues to mistreat Palestinians and stall.
There is, of course, much more on both sides. Rabin, an Israeli prime minister who was perhaps on the way to making peace with the Palestinians was killed by a right wing Jewish fanatic. Sharon has a history and philosopyh that is well known to the Arabs. He was in charge of a detail that massacred a village. I'm not sure what the extent of the "masacre" was but he definitely has bloody hands and is not disposed to peace. Both sides are plagued with rabid fundamentalists.