In both cases, in the topsy-turvy world of Islam, a completely unfounded and unsupportable opinion becomes the driving force behind irrational actions. In both cases, a paranoid worldview where the West is hellbent on destroying Islam is the only accepted "fact" and any shreds of "evidence" that support this absurd viewpoint are promoted beyond all rational belief.
Conversely, the 99% of things the West does that explicitly support Islam as a religion and its adherents as being worthy of respect and equal rights is given no weight whatsoever.
It is a world where, simply stated, paranoia is the basis for all actions and reactions, and facts are utterly ignored.
When viewed in this light, anything the West does to dissipate the paranoia is doomed. Israel can broadcast the Mughrabi Gate dig in high-def from 20 different angles and not one Arab or Muslim leader will be swayed to admit that their assertions of long-standing Jewish plans to destroy Al-Aqsa are inaccurate.
What causes such extreme paranoia among mainstream Muslims?
The answer can be summed up as Elder's First Rule of Muslim Projection: Muslims will project their own crimes and worldviews on everyone else.
It cannot be denied that Islam, along with many other religions, holds a supremacist worldview. This is natural - everyone believes that their belief system is superior to others. But what is little discussed in the West is how extreme Islam's brand of supremacy truly is.
I cannot claim to be an Islamic scholar but it is very hard to find Islamic leaders saying that they do not subscribe to the idea that Islam is meant to literally rule the world, by any means possible - by proselytizing, by demography, by war. The thinking is simple and explicit: dhimmis live as second-class citizens, infidels do not live.
When one grows up with this viewpoint, one assumes that his enemies also grow up with their own versions of the same viewpoint. So for Muslims to say that non-Muslims are determined to destroy Islam is a natural and foregone conclusion, and that is where fantasy becomes Muslim reality.
In other words, Muslims view the West - and Jews in particular - as if they think like Muslims do. Just as Jordan destroyed every synagogue in Jerusalem's Old City in a matter of days after gaining control in 1948, and this was considered natural, the Muslims assume that Jews have been planning the destruction of all mosques in Jerusalem since 1967 (the oft-repeated "Judaizing" meme.)
Every fact that supports their predetermined "truth" is promoted incessantly as evidence, every fact to the contrary is ignored or dismissed as being part of some much larger, nefarious Zionist plot to achieve the same goal. So you will find Muslim websites that prominently highlight and embellish supposed Zionist aggression against Al-Aqsa and none that mention that Israel itself voluntarily gave the Muslim Waqf control over the entire Temple Mount in 1967, nor that Israel has had the ability to destroy the mosque thousands of times over the past 30 years and has scrupulously protected the rights of Muslims to worship there as well as in many other Muslim sites that were themselves built on top of ancient Jewish holy places.
The next question then becomes, how can Israel or the West as a whole negotiate with a people who cannot distinguish between reality and their own paranoia?
UPDATE: Shrinkwrapped links here and has a much more detailed and frightening description of paranoia and projection.