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Apparently, Israel currently supports a two state solution at conditions that are unacceptable to the Palestinian Authority, but not worlds apart.
Palestinians, on the other hand, accept it merely as a stepping stone towards a one state solution.
Why?
The Palestinians ultimately want a one state solution because they believe, and have believed for a long time, that all land West of the Jordan river rightfully belongs to them. This been the Palestinian stance since before Israel existed. In 1937, Awni Bey Aboulhadi, Palestinian representative, said before the Peel Commission:
Every Arab in Palestine will do everything in his power to crush down Zionism, because Arabism and Zionism can never be united together. (Routledge Atlas of the Arab-Israeli Conflict)
Similarly, Arabs rejected the UN's partition plan in 1947 to create a Jewish and Palestinian state in British mandatory Palestine because they opposed the creation of any Jewish state. Though the Palestinian Liberation Organization agreed to a two-state solution in the Oslo Accords, as you pointed out, a two-state solution remains unpopular among Palestinians except as an interim to one state.
Even after the creation of the state of Israel, Palestinians have been taught that all land west of the Jordan river (including the West Bank, Gaza, and Israel) belongs to them. Even throughout the 1990s, textbooks used in UN-run Palestinian schools were explicitly anti-Semitic, and though there has been some improvement, many Palestinians are still taught with maps failing to depict Israel at all, and with material that denies any historical Jewish connection to Israel.
The Israel/Palestine Center for Research and Information found the following in their 2004 investigation of UNRWA textbooks:
The practice of 'appropriating' sites, areas, localities, geographic regions, etc. inside the territory of the State of Israel as Palestine/Palestinian observed in our previous review, remains a feature of the newly published textbooks (4th and 9th Grade) laying substantive grounds to the contention that the Palestinian Authority did not in fact recognize Israel as the State of the Jewish people.
...
The Jewish connection to the region, in general, and the Holy Land, in particular, is virtually missing. This lack of reference is perceived as tantamount to a denial of such a connection, although no direct evidence is found for such a denial." It also notes that "terms and passages used to describe some historical events are sometimes offensive in nature and could be construed as reflecting hatred of and discrimination against Jews and Judaism."
This failure to recognize Jewish history often manifests as temple denial, in which Palestinians do not recognize that the second Temple is buried in Jerusalem. A failure to recognize a Jewish connection to Israel contributes to the belief that Israel is rightfully Palestinian land, which is why Palestinians tend to prefer a single state encompassing all land west of the Jordan river.
More than half of all Palestinians live as refugees scattered in camps and other places around the world. An overwhelming majority of them wish to return.
Most of these refugees fled, or are descendants of persons who fled, from their homes within Israel. They are denied their right to return to their homes by Israel. If a Palestinian state was formed on the West Bank and Gaza, they would be allowed to return to that state but not to reclaim the land and homes they left.
That is why a combined State of Israel/Palestine where Jews and Palestinians have equal rights would be much preferable to them. In contrast, that option is not preferable to Jews as the State of Israel/Palestine wouldn't have a Jewish majority. History has taught them that it is much better to belong to the majority in a country than the minority.
