A two-state solution is still possible, but becoming vanishingly small:

On the Palestinian side, it doesn't give them the "right of return" (to the land they were expelled from in 1948) that they frankly deserve, which is a tough pill to swallow for them. But besides some hardliners they've pretty much resigned themselves to the fact they'll never get their stolen land back (much like the Native Americans).

On the Israeli side, it's much more problematic as it would mean dismantling many or all of the settlements on the WB. This is anathema to Israel and would be heavily resisted (perhaps violently) by the settlers who were put there in the first place expressly to prevent a two-state solution. Israel deliberately violated all the agreements about settlements reached over the years in order to create a situation where it could say "we can't expect those settlers to move out". It's no coincidence that the settlers who were given the stolen land are generally the most militant of the Israelis, and many are heavily armed, by the way.