Olmert has stated that
Israel is ready for "painful concessions" at the current Annapolis conference, which include the West Bank and parts of Jerusalem.
Unfortunately Israel's security establishment does not seem to be terribly ready.
Limiting IDF West Bank Operations Increases Rocket Threat on Tel Aviv
The Shin Bet and IDF agree that if the IDF stops operating in West Bank towns, the PA will not be able to impose order there and it would take just a few months for an effective infrastructure to develop in those towns for producing Kassam rockets that would threaten Israel's Sharon and Dan regions.
Ya'alon Warns Against East Jerusalem Pullout
An Israeli withdrawal from Arab neighborhoods of Jerusalem as part of a peace treaty with the Palestinians would put the whole city within range of Palestinian rocket fire, former chief of staff Lt.-Gen. (Res.) Moshe Ya'alon said Sunday. "One must be blind not to see that dividing the capital will bring the neighborhoods of Jerusalem, government ministries and schools into the range of Kassam rockets," Ya'alon said at a Jerusalem rally against the division of Jerusalem organized by the One Jerusalem organization.