This is why those who claim Israel is a "western democracy" are liars. It's just an ethnostate with the veneer of democracy and westernism put upon it so we westerners don't see what our governments are supporting. Saying "we stole land from these people not even a century ago, but we can't allow them back because of democracy" is such a disgusting notion. It's also not even true; Israel has a population of just under 10 million people. You could give true right of return to every impacted Palestinian and still only dilute the proportion of zionist citizens by like what, a handful of %?
But no instead the only "right of return" that Israel recognizes is the right of Jews from anywhere in the diaspora to come and live on bloodsoaked land. Doesn't matter if you're from friggin Antarctica, you've got a home in Israel if you're Jewish! Doesn't that whole notion seem ridiculous to you?
The Palestinian position is that Oslo and Camp David were not good faith compromises by Israel, but even if so Arafat made no counter-offer. He rejected the offers out of hand. Then the second Intifada started and ushered in Likud and Netanyahu which led us to where we are today.
As far as a Palestinian right-of-return to within Israel's borders. It would be the demographic end of a Jewish democratic Israel. It's the one thing that Israel absolutely will not and cannot compromise on. It's an unreasonable demand.
To my mind: Palestinians have never had effective leadership and they've been used as pawns by the other Arab nations. The lack of Palestinian leadership is not entirely the Palestinians' doing, at least since Arafat anyway. Israel has intentionally kept West Bank and Gaza leadership divided. Nonetheless, Palestinians are going to need to figure out a way to have effective leadership. Someone who is motivated and empowered to negotiate for peace, recognizing that Palestinians are not negotiating from a position of strength.