The WaPo has a good article on the growing professionalization of Palestinian security forces, and how they are beginning to serve as a viable anti-terrorism force in their own right. Unfortunately, their ties to the US (they are trained by American Gen. Keith Dayton) and the ruling Fatah Party make them somewhat controversial within Palestinian society. Hamas, unsurprisingly, hates them, as they hate everything else that might bring peace a little closer (to be fair, a strong national Palestinian security force would be serious threat to Hamas' viability, both as a direct threat to their own military operations and by weakening Hamas' claim to be the only entity capable of defending Palestine from Israeli incursions). But the Israelis are very impressed with their prowess, prompting them to remove dozens of West Bank roadblocks which had been strangling the Palestinian economy (and humiliating the Palestinians).
In a way, it is unfortunate that the settlements are right now the litmus test issue. Not because settlements aren't important or that rolling them back isn't a critical step for peace; but simply because security guarantees and checkpoint withdrawals are an arena where it looks like the players are making serious progress, of the sort that could spark major momentum towards a comprehensive peace solution. Unfortunately, these aren't the areas in the middle of the public eye right now, so a lot of potential energy is being lost. Oh well.