Israel keeps building settlements, Islamic militants are in control in Gaza and both the Israelis and the Palestinians have politically vulnerable leaders. All that will make it difficult to implement an agreement even if the two sides agree on a path to peace at a summit next month.

Weighing heavily on the U.S.-brokered summit is memory. Everyone remembers the steep price paid for the failure of the last round of peacemaking in 2001: thousands killed in years of Israeli-Palestinian fighting that broke out months after the talks fell apart.

This time, all the key players are eager to find something to show for themselves: Palestinian President Mahmoud Abbas in his showdown with the militants of Hamas, Israeli Prime Minister Ehud Olmert to save himself from the debacle of last year's war in Lebanon and President Bush to offset his troubles in Iraq.

Olmert told a parliamentary committee last week that if Israel can't make peace with the Palestinians' current moderate leadership _ President Abbas and U.S.-educated Prime Minister Salam Fayyad _ it won't be able to do it with anyone.

The Israeli leader said missing this opportunity will lead to killing for many years to come.

The sense of urgency was evident Monday during a fresh round of shuttle diplomacy by Secretary of State Condoleezza Rice. Shortly after she met with Abbas in the West Bank, Palestinian negotiators rushed to Jerusalem for an impromptu round of talks with their Israeli counterparts. Then Olmert, in a speech, suggested for the first time that Israel might give up some Arab neighborhoods of Jerusalem.

The chief Palestinian negotiator, Ahmed Qureia, had set an upbeat tone last week, telling The Associated Press: "I feel that there is a kind of new page that has been opened. There is trust building again."

But the challenges are enormous, topped as ever by the same two issues: violence and settlements.

Israel is unlikely to undertake the gargantuan task of uprooting tens of thousands of settlers from the West Bank unless Palestinian leaders guarantee the vacated territory won't become a launching ground for attacks _ as happened after Israel withdrew from Gaza in 2005.

Palestinians say Israel is jeopardizing the chances by expanding West Bank settlements, seizing more land for a West Bank road project and building a massive separation barrier that juts into territory Palestinians want for a future state.

Rice didn't mention those moves specifically during a news conference Monday, but clearly this is what she was talking about when she called on the parties to "avoid any steps that would undermine confidence."

In some of her most forceful comments to date, Rice said "it's time for the creation of a Palestinian state," and that the U.S. sees this "as essential for the future, not just of Palestinians and Israelis but also for the Middle East and indeed to American interests."

Rice is attempting to bridge wide divisions that have emerged over drafting a joint declaration ahead of November's conference in Annapolis, Md. The Palestinians want a fairly specific framework agreement addressing the so-called "core" issues of the Israeli-Palestinian conflict: the borders of a future Palestinian state, the status of Jerusalem and the fate of Palestinian refugees. Palestinian leaders fear that a lack of substance will be exploited by the Hamas militants who seized violent control of the Gaza Strip four months ago and refuse to recognize Israel's right to exist.

Olmert, on the other hand, is pushing for a vague statement that will leave the big questions open. Aides say he has no interest in having Abbas go home empty-handed, but at the same time fears conceding too much too soon could drown the whole process in domestic opposition.

Olmert's problems are worsened by multiple investigations of alleged corruption _ the latest announced on Sunday to probe allegations he did political favors for friends while serving as trade minister.

The Palestinians want the joint declaration to set a timetable for creating a Palestinian state. The Israelis want no deadline _ a position supported by the U.S.

It's far from clear whether a peace deal could be forged with Hamas ruling Gaza and Abbas' forces in control of only the West Bank. But moderates on both sides have been through enough negotiations to know what a peace deal would look like, including land swaps and a delicate power-sharing arrangement for Jerusalem.

What they don't know is how the rest of the Arab world will react _ particularly Saudi Arabia, whose wealth and political clout could do much to buttress a peace deal, especially if it chooses to attend the Annapolis summit.