Bush's mistake was that he thought democracy was the panacea for everything. Nations don't become free because Washington decrees that it be so. Nations become free as a function of their culture and national will.
At least now we know that the peace process was never anything but a mirage. the Arabs are never going to tolerate any kind of Jewish state in the Middle East, ever. Israel understands that there will never be peace with its neighbors, and that their existence will forever hinge upon keeping their enemies at bay.
The Palestinians have made it clear that statehood is nothing unless it includes ALL of mandated Palestine, and the eradication of the Jewish state of Israel. Any piecemeal gains will be used only as a new front against the "Zionist en y."
Nobody has to play pretend anymore. All that is left is a dog-and-pony show to appease the Saudi king that the Palestinian issue is not being completely ignored.