The situation has changed drastically since Arafat died.
The PLO began with the treaty breaking, and the Israelis, instead of calling them on it, broke their obligations. Logically, that made sense perhaps, since the PLO failed to live up to its obligations, but it was a very bad policy. Israel should have fought tooth and nail to get the PLO to adhere instead of abandoning the treaty.
It is clearly worth another try without Arafat. If it fails, nothing is lost. But if it succeeds, everything is to be gained.