Are you proposing the Jerusalem be divided?

David proposes anything thats fascist oriented.

That's another thing that needs to be eliminated is the growing European Nazism that is in Jerusalem.

Nothing is "obvious" here. Any possible settlement of the conflict that is politically realistic will clearly have to involve some very imaginative diplomatic formula regarding the status of Jerusalem, some way of assigning internal responsibility and control over different parts of the city without "dividing" it.

But even accepting your contention that the formula would have to put Jerusalem under some kind of international control or trusteeship, is it not perhaps compatible with that arrangement that the city under international control could also serve as the capital of a state? Or of two states? A capital city is just a city that houses a seat of government. Some states have no capital at all. Where is it written that a state's seat of government must lie within the sovereign territory of that state?

The city of Chandigarh is the capital of the two Indian states, Punjab and Haryana, but belongs to neither. Granted, in this case the states are, like US states, component parts of a single organized country. But that just means we need to find some way of creating a formal international model for something like the same arrangement.

Perhaps the city could officially fall under some kind of collective international sovereignty, with the international community then formally delegating perpetual administrative responsibilities of different parts of the city to Israel and Palestine, while recognizing Jerusalem as both the capital of Israel and the capital of Palestine.

I think he probably felt the need to clarify his position following some statements by his chief Middle East advisor, Daniel Kurtzer, in mid-May.

Dan K's take on this statement makes way more sense than David's.
Obama has no standing to "award" anything to anybody. If there's ever a workable deal, it will involve some very, very hard bargaining, and what Obama said to AIPAC won't be a bargaining chip.
And please note a subtle nuance in Obama's statement: "Jerusalem will remain the capital of Israel, and it must remain undivided."
That is different from "must remain the undivided capital," which is the standard formulation used by Israeli (and most U.S.) politicians.
Despite which, from what I understand, the separation wall already actually cuts off some wholly Palestinian areas (villages or suburbs) that are officially defined as part of the city.
So much for "eternal, undivided."
Creative solutions are possible once the will exists. (Not yet, I might add.)
In one scenario, Israel might get to keep all of Jerusalem, while Palestine keeps all of newly demarcated Al Quds (which used to be known as East Jerusalem).
There are no internal barriers between the two, and some kind of bi-national municipal authority handles common services.
Yeah, I know all the arguments why this can't possibly work.
But Israel got out of Sinai, got out of South Lebanon, got out of Gaza, and is set to discuss getting out of the Golan. Some of those moves paid off.
A permanently garrisoned Eretz Israel is not going to fly as the solution to the country's security problems, nor to its social and demographic dilemmas.
Now that he has little to lose, Olmert said as much last week.
Was Obama pandering to AIPAC with his speech? Of course, he was -- as were Hillary and McCain. That's what AIPAC exists for; it revels in pander.
Could he have taken the opportunity to point out the many flaws in Israel's current policies?
Sure he could have, but he is not politically insane.
There may come a time when Obama has to knock some Israeli and Oalestinian heads together.
The start of his presidential campaign is not that time.
So, like Alex say, chill, David.