I would agree that Israel negotiated from a position of strength, but saying it was a superior strength is subjective. Same for your characterization that the Arab states were at a "serious" disadvantage. It's subjective. But putting that aside, don't you prefer negotiating from a position of strength rather than a position of weakness? Would you turn your nose up at having an advantage?Israel definitely negotiated from a position of superior strength. With the USSR gone the Arab states were at a serious disadvantage but a peace is a peace and Israel only wanted security from her neighbors.
I think until they recognize Israel's legitimacy to exist as a Jewish state, there can be no peace; two state or otherwise. Besides there's a much easier solution that would be far harder for Israel to defend. Integrate. Assimilate. Rather than raising funds for purchasing weapons, raise funds for purchasing properties and businesses. Out breed them.