The wall has already proven it has stopped terror considerably.
Your other question is more intersting, because it raises intersting issues.
Assume for a minute the Israelis sit down with the PA, and conclude an agreement.
What then happens re Hamas, Jihad, PFLP, etc? They have said they will not abide with a negotiated settlement. Then what?
The PA, in order to remain relevant and credible-- harder to do because of corruption, etc and Hamas, popular because of providing social services-- has to disarm the terror groups. Othewise, they come to the table as a paper tiger.
In addition, it is unlikely that negotiating with the PA will work till Arafat AND Sharon are gone.
Time does matter. There is another 'biological bomb' in the region besides the Arab birth rate.
Within the next 2 or 3 election cycles, a Sephardic Israeli Prime Minister will be a reality-- a reality the region may not want to face. The autocratic regimes have not left many Sephardic Jews with happy memories, to put it mildly. This unspoken of issue may, in the end, be the catalyst needed to finally make some real headway in the peace process.
Interstingly, related to that, have you read about Bashar Assads welcoming Syrian Jews into Syria for a visit? Seems theyve fixed up a lot of cemetaries as well. Got a lot of press play here.
Seems hes laying some groundwork. He's smarter than he looks-- its a shrewd move on his part.