It is in America's interest that there be peace and stability in the middle east. The religious squabbles in that part of the world (Muslim/Jewish, Sunni/Shia)are none of our business, and our taking sides in any of them may be tempting in the short term, but in the long run will only lead to grief for us. Let's face it, God doesn't give a shit who owns Jerusalem.

As for how it could have gone, I would say one alternative would have been to tell the Israelis "If you stop building settlements in the West Bank we'll support your claims in Jerusalem." Or, we could have phrased it differently, and told the Arabs "Work with us in Jerusalem and we'll put pressure on the Israelis to give you a better deal at the peace negotiations."

In other words, we could have used our influence to sweeten the deal for one side or the other and help bring about a fair deal both sides could sign on to. Instead, we've played to the Bronze Age Bible-Banging fantasies of our own religious wackos, who don't give a damn about the Jews or the Arabs, but just about buying their own way into heaven.