The biggest problem that Arafat has is that recently the US has been putting pressure on Israel to accept the 'roadmap' to peace. However, the tacit understanding here is that it will exclude an unelected president, who for years has supported Hezbolla, and run a very corrupt regime. Perhaps not quite as bad as Iraq, but you can see the parallels.

Which is why the 'roadmap' was not published until Palestine elected a prime minister.
I feel rather sorry for Mahmoud Abbas, who is in an impossible position, because he doesn't have much real power. I'm sure he will negotiate in good faith, but if Arafat is there to block what is agreed, there is not much hope, is there?

I also think that the EU is being very unhelpful here (represented by France, as always), in insisting that Arafat is involved in any negotiations.