The 1967 borders are not the problem That has been agreed to by everyone forever. Even the Palestinians have agreed in principle to the idea that there would be something similar.
Basic issue is right of Return. Until both sides start dealing with that issue on a rational basis, then border discussion is just so much Kabuki theater. There really can be no worthwhile discussion on border issues until the right of return issue is resolved.
And when it comes to the borders issue, Israel has made some things very clear.
1) Tel Aviv will not be in range of Artillery.
2) Israel is keeping the Golan and all lands around the sea of Galilee
3) Israel is keeping Jerusalem and environs.
4) Gaza and west bank will not be contiguous. That would oblige Israel to be split. No way.
The Arab states have fed the Palestinians with the story they are going to get everything back to the level of pre 1948. All the Palestinians who ran off from Jaffa and all the other cities when the war started got dumped into camps and neglected. Israel's position is that the Arabs and Israelis both had a refugee problem in 1948. The Israelis had a problem that was considerably worse both in relative and in absolute terms. (650,000 Arab refugees, 850,000 Jewish refuges ) The Israelis took care of business, the Arabs didn't.
The Israeli point of view is that the Arabs were not chased off, the moved out of the way so the neighboring armies could finish off what Hitler started. They are not innocents who got trampled, but culpable conspirators who got hoist by their own cupidity. They are not at all sympathetic.
The Arabs maintain that the Jews pursued a systematic campaign of terror to scare folks out of their property. Fleeing your property in fear of your life does not mean it doesn't belong to you. The robber who chases you away from your wallet is not therefore entitled to the contents because at the moment you considered your life to be more valuable than a collection of bus tokens, a condom and a few dollars.
Anyway, both sides have dug in, neither side is interested in compromising on the one issue that really matter to both sides. Until both sides budge a bit, or even one sides budges a bit on the right of return, then the borders discussion is pretty moot.
As to what caused all the fireworks, Obama moved the borders discussion to the top of the debate tree. It is the last thing anyone really cares about, and the Israeli side thought that he was selling them out on the most important issue, right of return, in an effort to get peace on a matter of far less importance.