The last serious attempt to resolve these issues took place at the Camp David summit of July 2000, which ended in dismal failure and spurred the outbreak of the second Palestinian uprising two months later.
The inability of the sides to address these issues ahead of Annapolis is a further indication of their sensitivity. However, Israeli Prime Minister Ehud Olmert has nevertheless pledged to deal with them after Annapolis.
Below are the biggest potential deal breakers.
The Palestinian demand that refugees from the 1948-49 war and their descendants return to the homes they abandoned in what is now Israel, is perhaps the most explosive issue of all.
For Israelis, this is a red line. They regard the absorption of these refugees, whose number has in the past 60 years grown from some 800,000 to more than 4.6 million, into their own territory as the effective creation of another Palestinian state next to the future one in the West Bank and Gaza.
For Palestinians, however, what they regard as the "right of return" is also highly sensitive, and according to the most recent opinion polls, an approximately two-thirds majority of Palestinians demand the return of refugees to all of historic Palestine.
In Israel, however, there is almost wall-to-wall consensus against this, with some 87 per cent, according to the most recent opinion polls, saying they are against the return of even one Palestinian refugee to Israel itself, and another 6 per cent saying Israel can absorb just a small number of up to 100,000.
Olmert therefore, given the near wall-to-wall Israeli consensus on this issue, also has no room for manoeuvrability.
But President Mahmoud Abbas, recovering from a humiliating military defeat of his Fatah party in Gaza in June at the hands of Hamas and an equally humiliating defeat in January 2006 legislative elections of Fatah under his rule, cannot afford any controversial compromise on the issue right now.
This is another highly-charged subject, one involving religion and nationalism. Palestinians, for whom Jerusalem is the third-holiest city in Islam, demand Israel withdraw from those areas of the city occupied in the 1967 war and insist East Jerusalem serve as the capital of their future state.
But Jerusalem is also the holiest city in Judaism, mentioned over 700 times in the Old Testament.
Israel annexed East Jerusalem shortly after capturing it from the Jordanian Arab Legion in June 1967 and redefined the city boundaries to include the Arab neighbourhoods. The annexation was never recognised internationally.
While there has been a slight but fragile majority in Israel over giving Palestinians sovereignty over Palestinian-populated neighbourhoods in the city, East Jerusalem also contains neighbourhoods inhabited by Israelis - not to mention the historic Jewish Quarter in the Old City - which no Israeli prime minister could transfer to Palestinian sovereignty without paying the politcal price.
But the Temple Mount/Haram al-Sharif compound, which houses the Dome of the Rock and al-Aqsa mosques and abuts the Western Wall, is the flashpoint.
Moslems believe it marks the spot from where the prophet Mohammed ascended to heaven. Jews venerate the site as as being built on the ruins of the biblical temple.
Neither side, therefore, would want it transferred to the other's sole sovereignty and proposals to share sovereignty have also met with vociferous objections.
The armistice line from the end of the 1948-49 war has became the de facto border separating sovereign Israel from the West Bank.
Palestinians demand a full Israeli withdrawal to these lines; Olmert has spoken about an Israeli pullout from most of the West Bank, without specifying.
President George W Bush, in a statement from April 2003, seemingly endorsed Israel's refusal to pull out from the entire West Bank, saying that "facts on the ground" had changed since the armistice lines were drawn up.
Palestinians remain unconvinced, rejecting anything less than a complete West Bank pullout, pointing out that as things now stand, a Palestinian state in the West Bank and Gaza Strip would only occupy a small part of pre-1948 Palestine.
But Israelis point out that total withdrawal has security ramifications, with the West Bank border at one point being only about 14 kilometres from the sea.
The experience of the 2005 pullout from the Gaza Strip, which saw the salient then used by militant groups as a base from which to launch makeshift rockets at nearby Israeli towns and villages on an almost-daily basis, has also soured many Israelis on a total withdrawal, and is in fact repeatedly cited by those who oppose such a move.
In addition, a West Bank withdrawal is linked to another issue, namely that of Israeli settlements. Palestinians, who see them as Jewish enclaves on their land, preventing the formation of a contiguous state, insist they be dismantled entirely.
But Israel wants to keep so-called "settlement blocks" - those near major population centres, such as Ma'aleh Adumim, located several kilometres east of Jerusalem, or those situated near the border.
One idea which has been raised to solve the withdrawal and settlement logjam is a territorial exchange, with Palestinians receiving an equal amount of Israel territory to that annexed.
-- ISRAELI SECURITY:
This is the least-mentioned core issue, and while it may be the easiest to solve, it could also be the hardest to enforce.
While Security Council Resolution 242 of November 22, 1967 - the basis for all intended Israeli-Palestinian negotiations - calls for "withdrawal of Israeli armed forces from territories of recent conflict," it also speaks of "the territorial integrity and political independence of every state in the area and their right to live within secure and recognised boundaries free form threats or acts of force."
Given the absence of a conventional military threat from the Palestinians, the Israelis interpret this as meaning that attacks by militants have to cease, be they in the West Bank or in sovereign Israel.
A repeated Israeli demand is that the Palestinian Authority crack down on militant groups such as Hamas, the Islamic Jihad or even the increasingly independent armed wing of Abbas' own Fatah movement.
Abbas can pledge to do so, but implementation is something else -the armed militias do not see themselves as under the orders of the PA, and do not request its permission to carry out an attack.
In addition, by using his own security forces to crack down, Abbas runs the risk of alienating his own people, most of whom see attacks against Israeli soldiers, and even civilians, as acts of resistance and heroism.
But a massive attack by militants, involving significant Israeli casualties, and failure by Abbas to crack down, could lead to an Israeli military response, and the region could be plunged back into the old, familiar, vicious cycle of violence. dpa ok jab ds
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