First of all, this exchange could not have happened in a "town hall" format during the George W. Bush administration.
You can watch his mind at work, as he sort of tries to answer this courageous student's question at first, then realizes he can't, then acknowledges other people in the audience, to diffuse focus on her initial question, then tries to broadly address what she brought up without getting into a conflict with his administration's operative policy.
His administration's operative policy is to continue to allow the expansion of Israeli settlements in the West Bank; to finance the building of a wall around Gaza that goes 200 feet underground at the expense of Palestinian human rights (a lot of the work being let out now is being arranged under no-bid contracts to Obama donors); to accomodate the Israelis in their refusal to allow the basic necessities of life from getting into Gazagrad; to refuse to support Palestinians in the West Bank who are true 21st Century Gandhis, but have been targeted by the Israelis for detention, imprisonment or assassination; and to put no pressure on U.S. laws that allow Americans tax credits for investing in expansion projects which steal Palestinian land.
This young woman, when interviewed after the event by local media, commented on the President's response to her question:
Of course we love a two state solution, but there has to be trust and dialogue between two sides. The Palestinian people are ready for a two state solution, but the Palestinian people are the ones being occupied by Israelis. How are the Palestinian people supposed to do anything if they’re the ones being occupied? The occupiers have to allow for something to happen which they have not yet allowed to happen. I asked President Obama why he says America as a nation supports human rights, but at the same time, one of our greatest allies is Israel, a country that does not support human rights, and has many human rights violations. President Obama did not really answer my question or address it, so I’m really disappointed right now.
The context of the student's question had, of course, meaning in the Gaza invasion last year, in which the IDF killed over 1,000 civilians in a few days, and intentionally destroyed a lot of valuable infrastructure, using your and my money to do the job. This criminal set of acts involved a lot of intense violence. Yet Obama states that Palestinians, whose land is being stolen every fucking day, have to renounce violence, and recognize an Israel that is - from their viewpoint - gobbling up their land duman by hectare by acre - and that country's right to continue to do just that.
hat tip - Adam Horowitz at Mondoweiss