Jerusalem (CNSNews.com) - As the Arab League prepares for a key summit later this month, Israeli officials are hoping the bloc may renew a peace proposal first put forward five years ago. That proposal floundered after hard-line Arab leaders inserted deal-breaking language.

The 22-nation Arab League is scheduled to meet in Riyadh later this month, and atop the agenda is a proposal it first adopted at a Beirut summit in 2002, offering Israel peace and normal relations with its neighbors in return for a full surrender of territory it captured in 1967.

When the Saudi-drafted proposal was first publicized in the run-up to the 2002 meeting, Israel reacted positively. But at the Beirut summit itself, Arab delegates insisted on including a reference to the "right of return" for millions of Palestinian refugees to towns inside Israel.

The Israeli government then dismissed the initiative, which it saw as yet another attempt to demographically destroy the Jewish state by flooding it with Palestinians and their descendants who left sovereign Israeli territory during wars decades ago.

With the international community's Middle East "Quartet" renewing efforts to kick-start the Israeli-Arab peace process, Israel is hopeful the Saudi proposal may revert to its original form.

In a series of media appearances last week, Israeli Foreign Minister Tzipi Livni said Jerusalem continues to see the plan as a positive one - but it needs to be amended.

"A new summit is in the offing, and they ought to know which parts of the proposal are acceptable to Israel and what seems to us like an absolute red line," Livni told Israel's Channel 10 News.

Speaking to the Palestinian daily newspaper Al-Ayyam, Livni said, "at first the Saudi initiative was a positive sign, but when the radicals in Beirut added things that contravene the two-state solution, then for us it became unacceptable."

Israel's leaders by and large share President Bush's vision of a "two-state solution" to the conflict, which envisions Palestinian sovereignty in territories they claim in the Gaza Strip and West Bank.

But contrary to Arab demands, Israel wants that Palestinian state to put the Palestinian refugee issue to rest.

If the "right of return" language is removed from the current Arab proposal -- or at least downgraded -- several Israeli experts on peace process told Cybercast News Service they would share the government's optimism over the initiative.

If the original proposal is revived, "it could serve as a basis (for peace)," said Professor Barry Rubin, who heads the Interdisciplinary Center's Global Research in International Affairs Center.

Gidi Grinstein, president of the Re'ut Institute, a policy think tank that advises the Israeli government, said the significance of the Arab initiative lies "in the willingness of the Arab League to engage the idea of normalization with Israel."

But Rubin pointed out that in addition to the refugee issue, the current version of the proposal states that "Israel must return to its 1967 borders, [and] excludes changes based on mutual agreement." It also does not stipulate Arab compliance until after Israel has fully met Arab demands.

Assuming that those wrinkles can be ironed out, Rubin said, the proposal "is a promising idea."

However, both analysts acknowledged long-term dangers present in the plan, mostly pertaining to the volatility of the region.

Many Israelis fear that even if the current Arab regimes are sincere about making peace along the lines of the Saudi proposal, new and even more hostile leaders could at any time take power in one or more neighboring states. This could mean future wars -- but with Israel fighting from indefensible borders, having surrendered its most strategically important regions.

"This concern is credible," said Grinstein. "Any political arrangement should improve our security package, but such a scenario is not unlikely."

Official Israeli optimism looked premature Sunday, when Arab League Secretary-General Amr Moussa told Arab foreign ministers in Cairo that there was no intention of altering the current terms of the proposal.

Moussa's stance, coupled with the ruling Palestinian faction Hamas' ongoing refusal to recognize Israel's right to exist, appeared to pour cold water on hopes for a peace settlement.

Nevertheless, the outcome of the upcoming Arab summit, scheduled for March 28 and 29, is expected to shape Middle East peace efforts for the next several years.