On moving the Embassy to Jerusalem it makes sense and the time to compromise is over. Even though it is nominally Secular, Israel has from it’s outset been defined by a Religion. Shifting borders will just shift the problem. The problem now is Demographics. The Two State solution is Dead on Arrival. Most serious analysts and commentators admit, now openly, that Israel will never let a truly independent Palestinian State exist along side them. It is quite understandable for Leaders there to feel this way. The choice is between survival and ceasing to exist. Sure there is wrong on both sides but submitting to Hamas and the PA would be a step backwards. Hopefully a forward thinking Palestinian Politician will realize it is better to throw lot with Israelis. But to do that whoever this person is will have to take on 1400 years of damage by Islam to fabric of civil society.
In the end, the City as Capitol, if done right could be used to Unite rather than divide. But when it comes to things defined by religion, solutions and rational are words not often found in same sentence.