The President endorsed the concept of two states for two peoples. However, he called for a demilitarized Palestinian state along the 1967 lines with agreed upon land swaps. This is the first time an American President has ever used those words in public. Note that the 1967 are not borders, but are in actuality the armistice lines from the 1948 War.
The President did acknowledge that Hamas' presence in the Palestinian unity government renders it problematic for Israel to engage in negotiations with the Palestinian Authority. It is hard to have a discussion with someone advocating your destruction. The President also publicly rejected attempts by the Palestinians to gain recognition for their own state before the United Nations. "Symbolic actions to isolate Israel at the United Nations in September won't create an independent state," Obama said.
He also stated that the "future of Jerusalem" remains to be worked out, as does the fate of Palestinian refugees. Prime Minister Netanyahu described the military lines of the 1967 borders as "indefensible."
I am not sure where this leads. The concept of two states for two peoples is not new policy for the United States. I have always been of the impression that both sides have a general idea of where those boundaries would lie and that the major settlement blocs would be included within Israel. However, no Palestinian official has ever said yes to any issue in negotiations with Israel since Oslo. So it is not the statement itself that is objectionable as much as the public utterance of it by President Obama.
Recall that the Bush letter to Sharon (4/14/04) acknowledged the facts on the ground (i.e., settlements) and that any negotiated peace would have to takes these facts into account. "In light of new realities on the ground, including already existing major Israeli populations centers, it is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949, and all previous efforts to negotiate a two-state solution have reached the same conclusion. It is realistic to expect that any final status agreement will only be achieved on the basis of mutually agreed changes that reflect these realities." That same letter acknowledged UN Security Council Resolution 242 as part of Israel’s secure and recognized borders.
Perhaps the difference between Presidents Bush and Obama is merely one of emphasis. But there is no doubting that Bush's emphasis is more pro-Israel and Obama's is not. In order for there to be peace and a final settlement, Palestinians are going to have to come to grips with both the legitimacy and the permanence of the Jewish State. That is why Palestinian recognition of Israel’s Jewish character is so important. Palestinian Arabs are not close to being there, while President Obama failed to mention that fact.
Implicit in that speech is that Israel refusing to negotiate with any government that contains Hamas is acceptable to the United States. President Obama accepted Prime Minister Netanyahu's demands for strict security arrangements and a gradual, continuous withdrawal from the West Bank. These have to be viewed as positives for Israel.
All in all – a mixed bag.