Whether or not the two-state solution is dead, recognizing Jerusalem as the capital of Israel and moving the embassy there certainly isn’t to blame. You seem not to have read or listened to Trump’s statement- he did not take a stand on “undivided” or whether a Palestinian entity could or could not have some official presence there. He called for peace talks.
The move actually creates incentive for the Palestinians to finally negotiate in earnest. Before this, one reason the rejectionists had to torpedo negotiations is that the resulting peace would surely include Arab recognition of Jerusalem as the capital of Israel even if it also included recognition of a Palestinian state with its capital there as well. Their prime goal is not to get a state they could have had ten times since 1937, but rather to roll back and destroy the Jewish state. Now that they can’t stop the US recognition and the embassy move, they may at least for now put destruction of Israel on the back burner in favor of a more immediate need to get the best deal they can. This is all about creating conditions where the Arab terrorists and rejectionists don’t hold veto power and that the larger populace starts to see a negotiated deal as the only realistic way to go.