One part of his speech is very telling:
What is even more important is that Israel stops the settlements. The demand to stop the settlements does not mean that (Israel) can legalize what has already been built – all settlement ever since 1967 is void. We know that when they signed a peace agreement with Egypt, they uprooted a number of settlements, and when Ariel Sharon got out of Gaza, they uprooted 18 settlements.
Abbas is telling his diplomats that he will demand that Israel dismantle the homes of hundreds of thousands of people, without compromise. And he is confident that Israel will do that because Israel uprooted a few thousand Jews from the Sinai and from Gaza, leaving none behind.
Abbas is saying that the official PLO line is that there will never be any compromise with Israel on borders or people. "Palestine" would not consider having Jews living inside, even though there are hundreds of Arab villages in Israel.
And the reason Abbas believes he has no reason to negotiate over this is because Israel has shown in the past that it will make hard choices for peace. Israel's desire for peace has made Abbas less interested in working on a solution, and more confident that Israel is weak and will give up without a fight. His entire strategy of refusing to negotiate and instead use international pressure on Israel is based on his assumption of Israeli political weakness that he perceives in Yamit and Gaza.
It is another manifestation of how Arabs respect strength and show contempt for compromise. They play a zero-sum game while Israelis try to find win-win solutions.
(h/t Ibn Boutros)