Probably not the best move by the Obama administration. Bringing up Jerusalem is kind of the third rail in Israel-Arab negotiations. The issue is buried way back in the attic of final status issues for a reason.
On a separate note, Salam Fayyad, Palestinian PM, made comments supporting the US' pressure on Israel. These will most likely polarize Israeli public opinion and not be particularly helpful to the US. If Fayyad hadn't noticed, the US doesn't really need much help making Israel react to a demand on settlements. The best Palestinian strategy would be to lay low for now and get ready for when Obama pressures them.