I don’t think you’ve adequately considered the context. The larger picture is that the Sunni Arabs have been seeking a strategic partner against Shia expansion and ISIS/Al Qaeda Muslim Brotherhood extremists. The Saudis and Gulf states have had numerous contacts with Israel, and Egypt and Israel are cooperating militarily on Gaza and the Sinai. Meanwhile various trial- balloon peace proposals from Arab sources have been leaked. All the time Jared and other Trump Administration officials have been making contact with the parties.
Arab and Israeli leaders all realize the Palestinian issue needs to be resolved for more overt cooperation to occur. The Arab leaders are going to make a show and push to get the Palestinians the best deal they can, but they’ll try hard to ensure the Palestinian issue doesn’t get in the way of the larger strategic alignment.
The acknowledgement of Jerusalem as the capital of Israel without precluding Palestinian presence in the city was likely orchestrated to leave an opening. I suspect the Saudis, Egyptians, and others knew this was going to happen well in advance.
After a few weeks of pro-forma objection and the usual rioting, things will become calm enough for the Saudis to push the Palestinians to the negotiating table and to insist they stop stalling. Maybe they’ll get a sizable chunk of land from Egypt to extend Gaza into the Sinai and a demilitarized Palestinian capital in Jerusalem. Somewhere along the line Hamas will be tamed or liquidated. We don’t know what’s really going on, but this larger strategic context absolutely needs to be considered.