Apparently, Israel currently supports a two state solution at conditions that are unacceptable to the Palestinian Authority, but not worlds apart.
Palestinians, on the other hand, accept it merely as a stepping stone towards a one state solution.
Why?
The Palestinians ultimately want a one state solution because they believe, and have believed for a long time, that all land West of the Jordan river rightfully belongs to them. This been the Palestinian stance since before Israel existed. In 1937, Awni Bey Aboulhadi, Palestinian representative, said before the Peel Commission:
Every Arab in Palestine will do everything in his power to crush down Zionism, because Arabism and Zionism can never be united together. (Routledge Atlas of the Arab-Israeli Conflict)
Similarly, Arabs rejected the UN's partition plan in 1947 to create a Jewish and an Arab state in British mandatory Palestine because they opposed the creation of any Jewish state. Though the Palestinian Liberation Organization agreed to a two-state solution in the Oslo Accords, as you pointed out, a two-state solution remains unpopular among Palestinians except as an interim to one state.
Even after the creation of the state of Israel, Palestinians have been taught that all land west of the Jordan river (including the West Bank, Gaza, and Israel) belongs to them. Even throughout the 1990s, textbooks used in UN-run Palestinian schools were explicitly anti-Semitic, and though there has been some improvement, many Palestinians are still taught with maps failing to depict Israel at all, and with material that denies any historical Jewish connection to Israel.
The Israel/Palestine Center for Research and Information found the following in their 2004 investigation of UNRWA textbooks:
The practice of 'appropriating' sites, areas, localities, geographic regions, etc. inside the territory of the State of Israel as Palestine/Palestinian observed in our previous review, remains a feature of the newly published textbooks (4th and 9th Grade) laying substantive grounds to the contention that the Palestinian Authority did not in fact recognize Israel as the State of the Jewish people.
...
The Jewish connection to the region, in general, and the Holy Land, in particular, is virtually missing. This lack of reference is perceived as tantamount to a denial of such a connection, although no direct evidence is found for such a denial." It also notes that "terms and passages used to describe some historical events are sometimes offensive in nature and could be construed as reflecting hatred of and discrimination against Jews and Judaism."
This failure to recognize Jewish history often manifests as temple denial, in which Palestinians do not recognize that the second Temple is buried in Jerusalem. A failure to recognize a Jewish connection to Israel contributes to the belief that Israel is rightfully Palestinian land, which is why Palestinians tend to prefer a single state encompassing all land west of the Jordan river.
More than half of all Palestinians live as refugees scattered in camps and other places around the world. An overwhelming majority of them wish to return.
Most of these refugees either fled their homes or were forcibly removed from them by Jewish forces in the 1948 Palestine war. Following the war, they were prevented from returning and classified as "absentees". Their property, "absentee property", was was confiscated by the Israel and transferred to Jewish settlers.
In 1973, Israel enacted the Absentees’ Property (Compensation) Law which, in certain cases, allowed "absentees" to claim compensation for seized property (though not allowing them to reclaim ownership of the property). However, the compensation paid for confiscated property was unreasonably low and only Palestinians living in Israel ("present absentees") were allowed to claim compensation. Moreover, the law only gave a 15 year time window for filing claims and hence it has been irrelevant since 1988.
Thus, if a Palestinian state was formed on the West Bank and Gaza, they would be allowed to "return" to that state but not to reclaim the land and homes they left.
That is why a combined State of Israel/Palestine where Jews and Palestinians have equal rights would be much preferable to them. In contrast, that option is undesirable to Israeli Jews as the State of Israel/Palestine wouldn't have a Jewish majority. They believe that current and historical antisemitism teaches them that it is much better to belong to a country's majority than minority.
also, those are arguably two different questions. One is asking why there is a majority of Palestinians who want a one state solution, and the other is asking why that majority wants it. One is personal motivations, the other is political.
– Publius Oct 24 '14 at 05:04