The Jewish State Condition

President Abbas sounded off about recognizing Israel as a Jewish state (Palestinian negotiators rebuffed a similar Israeli request in 2007). From Ynet:

"A Jewish state, what is that supposed to mean?" Abbas asked in a speech in the West Bank's political capital of Ramallah. "You can call yourselves as you like, but I don't accept it and I say so publicly."
 
He said it's not his job to define the state of Israel. "Name yourself, it's not my business," He said. "All I know is that there is the state of Israel, in the borders of 1967, not one centimeter more, not one centimeter less.
Anything else, I don't accept."

The common spin is that this is a tussle over the Palestinian right of return. If Israel is a Jewish state and Palestinians publicly accept that, Israel cannot be asked to take in millions of non-Jewish Palestinian refugees.

Yet key statements of the past, including the Clinton parameters back in 2000 and the Bush-Sharon exchange of 2004, made clear that Palestinian refugees who return would return to the new state of Palestine (West Bank and Gaza), not Israel.

So is there anything more to Israel's Jewish state condition? By pressing this issue, is Prime Minister Netanyahu hoping to scuttle the push for high-level negotiations over a two-state solution? Does he perhaps hope to concede the point in exchange for something else?