That is up-to the Palestinians and Israeli negotiators to decide on the borders. You would be very naive to think that Israel will give up East-Jerusalem, or evacuate any of their more established settlements. The settlements in the West Bank have been increasing in number in the last 20 years, with international pressure not really doing much to curb them, and the current Israeli government doesn't seem in a hurry to slow down
You pretty much just summed up why Israel will not end it's heinous illegal settlement expansion plans, and why they are the real problem and main culprit in this conflict. Like you said, they have all the leverage. And they are abusing that in every single way possible.
Blockades, military occupations, demolitions en mass, land theft, unjustified arrests in huge numbers with the victims given no proper access to legal aid or justice, torture, brutality, the control of humanitarian aid and supplies, extreme disproportionate military action and strikes etc etc.
They're taking it to a whole new level. And will continue to whilst the rest of the world (mainly the US) allows it. Ultimately there may not be much left of Palestine at all if the rest of the world doesn't step in to say enough is enough. It's why it's so much more important now than ever before to raise our voices.
Also doesn't matter whether Israel want to give up much of that land or not, fact of the matter is, the land steal and territories that many of these settlements are built and being built upon, are not only illegal under international law, but also Palestinian as recognised by the international community and laws, and at some point Israel is going to have to factor that in. Territory stealing by brutal occupation and aggression is not something that is generally accepted in this day and age, and laws and rules exist against it for good reason.