Fallout from the settlement controversy continues: PM Netanyahu proposes confidence building measures with Palestinians; Special Envoy Mitchell will return to the region; Charles Krauthammer says Pres. Obama is picking on Israel but the Christian Science Monitor says settlements threaten world security; the Quartet calls for a Palestinian state within two years; most Israelis see Pres. Obama as friendly and fair; Anshel Pfeffer says Netanyahu has lost this fight and Doron Rosenblum says he is trying to please his father; Susie Becher says Israelis have to face the fact that dominating all Jerusalem and peace are incompatible; JJ Goldberg says the confrontation was inevitable; the journal of Shas calls present Obama "a stone throwing Palestinian." Israeli forces bomb Gaza. Palestinians say they're going to try to reduce dependence on Western training. Israel's Foreign Ministry is concerned it is being branded an apartheid state. The US imposes sanctions on Hamas-related organizations. The ADL slams Gen. David Petraeus for suggesting Israeli policies harm US interests, but Alan Philps says the US military in general is taking a harder line towards Israel.