There was no "Palestinian territory" in the 1967 map. Gaza was part of Egypt, the West Bank was part of Jordan.

But neither Egypt nor Jordan want anything to do with them now because of the internal instability it would inevitably result in.

Regardless of other borders, Israel would retreat back to its 1967 borders. That is what they are saying.

They won't. The 1967 borders were broken by a war Israel did not start, but still won anyway. And Palestinians have refused any agreement on where the border should reside since then, which resulted in the current limbo situation. From Israel's perspective, if people wanted to keep the 1967 borders, they shouldn't have tried to invade (again) in 1973. Why would they go back to the terms of an agreement that was already violated.