Ironically, that was one of the biggest campaign points and voter sentiment on which people flipped to Red. We all know what happened.
The neighbors who signed peace treaties (Egypt, Jordan) seem to be maintaining peace fine.
It's the ones who've refused to normalize relations since 1949 and keep launching rockets over the border at civilians who get hit back.
And, yes, the settlers are not a good thing--but the problem exists because the government knows they are not the actual cause of the problem, Israel would gain nothing from curtailing them. And note that the violence is wildly misreported, much of it is defensive in nature (look at how often you see one person get shot who is facing the settlers when supposedly they were fleeing--awfully hard to shoot a fleeing person in the front) and plenty of it is purely fake.