What are they supposed to compromise on? They have nothing to give to Israel except an enhanced version of the security guarantees they already implement. Netanyahu likes to say that he will not sacrifice Israel’s security for any peace agreement. But he knows that he will never be asked to. Every significant proposal for Israeli-Palestinian peace contains extensive security guarantees for Israel . Notably,the Palestinians, who are infinitely weaker than Israel, don’t demand security guarantees, just their territory.
It's hard to overstate just how important this is to understand for anyone following the peace process. This certainly wasn't true in 1994 after the Oslo Accords were signed and it wasn't true in 2001. In the past Israel's security in the West Bank (where the settlements are and which borders Jerusalem and is close to Tel Aviv) was certainly not ensured in the past. With Palestinian Authority security cooperation (including the PA's routing of Hamas from the West Bank), Israel's security is about a ensured as one could possibly expect an occupied force to be in a hostile territory. Violence now is almost entirely contained within a gang war of sorts between small segments of the Palestinian population and belligerent Israeli settlers in the West Bank.
The old formula for peace talks, "Land for Peace," is obsolete. Israel has the land it has long coveted for the most part, and it has a stable, largely peaceful security situation in the West Bank. The PA cooperates with Israel on security, the EU and other international donors provide aid to the Palestinians, and Israel is relieved of many of the burdens of occupying the territory.
M.J. Rosenberg's point is that the Palestinians have nothing to give in talks except "an enhanced version of the security guarantees they already implement." I don't think that's quite right. The only real reason for Israel to pursue peace talks with Palestine is to gain unquestioned international legitimacy for the settlement enterprise. This, rather than enhanced security is the only thing the Palestinians could possibly give the Israelis in return for Israeli approval and recognition of the State of Palestine.
Without Palestine signing a peace agreement formally relinquishing their claims to the land upon which settlements are built, Israel still faces international pressure for their settlement policies. While this has rarely manifested as a punitive measure taken to correct Israeli actions, the EU did recently issue a directive banning all grants and awards to settlement organizations. Israeli leaders are deeply troubled by the possibility of more measures like this being adopted.
In short, the peace talks serve one purpose: Israel seeks Palestinian recognition of their West Bank settlements, while Palestine asks for Israeli recognition of their state in the remainder of the West Bank and the Gaza Strip.