The '67 war happened less than two decades after Israel's founding; a founding still fresh in their memories and one which Arabs saw as injustice.
Just because Arabs saw it as injustice does not mean it was injustice, as a matter of fact, the entire non-muslim world was on Israel's side (and still basically is, most european countries defend Israel's right to exist).
To all but Jewish eyes, Arabs grievances in '67 (and '73) appear entirely reasonable.
Nonsense, they start wars, they lose wars, they refuse peace, they resort to violence and terrorism, their grievances may appear reasonable to right wing racists like you and KKK and left wing fringe radicals like Jimmy Carter and Z10 but hardly to anyone else.
However, with the passage of time, large numbers of Arabs have come to accept the existence of the Israeli state.
I am yet to see any evidence of that. As I expected you completely avoided naming a single arab organization, party or movement promoting peace with Israel ON ANY CONDITIONS AND WITHIN ANY BORDERS. Sorry but your baseless declaration is hardly good enough.
What remains, and probably forever will remain, unacceptable, is Israel's hold on the west bank and east Jerusalem. And that too, from non-Jewish eyes, is completely understandable.
That must be why they turned down Clinton's peace proposal giving them back the West Bank, Gaza and East Jerusalem. Moreover, I don't recall Arafat making a counter-offer and spelling out on what condition he would have agreed to peace with Israel.
So if peace is at the foremost of Israeli minds, why on earth persist in settling Palestinian land and keeping Palestinians not only occupied, but under virtual lockdown?
Because like me they don't take seriously your baseless claim that their withdrawal from the West Bank will bring peace and recognition any more than their withdrawal from Lebanon and Gaza did. You are making an assertion which is not based on reality and then wonder why Israel does not live up to your completely flawed vision. Duh!
And I think you are forgetting the tiny matter of all those hundreds of thousands of Arabs Israel expelled from their homes.
But that's not exactly what happened, is it?
"Some cases of expulsion are well-documented, such as in Lydda and Ramle. In other cases, such as in Beersheba and Safed, the Arabs fled before Jewish troops had entered.[3]
Paradoxically, there were instances of Jewish leaders requesting that resident Arabs stay, as well as Arab leaders who called for evacuation of civilian Arabs from the war zone.[4] How much each factor has contributed is disputed."
http://en.wikipedia.org/wiki/Palestinian_exodus
And how about 900,000 jewish refugees who were expelled from arab countries after Israel was created:
Of the nearly 900,000 Jewish refugees, approximately 600,000 were absorbed by Israel; the remainder went to Europe and the Americas. Today, almost half of Israel's Jewish citizens are the original refugees and their descendants...These refugees were forced to abandon virtually all of their property, especially as they fled from the most hostile countries: Egypt, Syria, Iraq, and Libya.
These refugees were
gradually absorbed and integrated into the Israeli society, a substantial logistical achievement, without help from the United Nations' various refugee organizations.
http://en.wikipedia.org/wiki/Jewish_exodus_from_Arab_lands
What kind of compensation do you think they are entitled to? Or only Palestinian refugees (caused by and large by their own actions) count?