A much better idea than sending observers is to deploy an international force to stop the violence. Observers can never stop the killing and destruction. The most they can do is report on who has fired on whom. Assuming that they are sufficient in number and well-placed, such a team of observers would end up carrying out a very limited mandate.
Since what is called for is a halt to all forms of violence, the two sides would need a much bigger force to police an armistice that could be declared on the ground. Since the boundaries between Israel and the occupied territories are pretty well delineated, it should not be too difficult to place such an international peacekeeping force along these lines.
For Israel’s security, the deployment of such a force along the old armistice lines would prevent any incursions into its own territory. For Palestinians, such a deployment would end all Israeli military incursions into their lands.
That could be the beginning of the end of hostilities that could set the stage for real peace talks. Both sides must be pretty tired of bloodshed and ready for genuine peace talks. If the deployment of an international peacekeeping force would lead to such a result, it is worth pursuing and applying.
That is why, instead of wasting time and energy on a plan of action which could end up becoming a non-starter, more thought and consideration should be applied to a much bigger and a more effective plan of action envisaging the creation of an effective international force to be deployed on par with a peacekeeping force.