As Den Beste noted and the NYTimes article reinforces, "desperation" is only part of the problem -- and maybe not a big part at that. The people turning themselves into bombs aren't (exclusively) the poor or the religious. Many of them are educated (it defies my imagination for someone close to achieving a Master's degree to join in the attacks), many of them would seem to have good reasons to continue living (one of the recent bombers was a woman with a 3-year-old child), and many of them don't even seem to hate Israelis all that much (the woman interviewed in the NYTimes is quoted as saying that she has several Israeli friends, and even hopes to receive e-mail from them; not only that, but she scoffed at the idea that she would be reunited with her dead fiancé in heaven).

I think Den Beste is also accurate when he says that this is a war of genocide -- from the Palestinian perspective. Israel can't and won't perform genocidal attacks on the Palestinians, but the Palestinians suffer no such limitations. Appeasing them is going to take precisely the same track as appeasing Germany did in the late 30's; rather than give them an incentive to back down, it will give them more resources and more space and time to plan their next set of assaults, and even more reason to continue. And, as in the Pacific war with Japan, I'm rapidly coming to the conclusion that the only workable solution[1] is to utterly convince the Palestinian culture -- not merely the leadership, but the entire populace -- that they do not want to continue fighting. In Japan, it took a pair of atomic bombs.