I am surprised at how the Administration appears so surprised at the reaction. Granted I am at a distance and long ago gave up trying to figure out the rational for why this Administration does what it does, but it appears that the Administration kept the plan to say "1967 border, with swaps," and be deliberately ambiguous about the nature of things that the majority of Israelis (and their American supporters) care about, totally secret from either Israel's government or any American Jewish orgs that might be supportive of this position. Nor did they line up any Arab or EU support to help sell this as a more moderate shift.
Unless this is playing much better with EU governments who are trying to decide whether to support a PA declaration of statehood in the fall, I don't see that they gained all that much. And it is costing Obama political points.
Obama appears to have misjudged just how much his credibility has eroded with supporters since taking office. Had he made a speech like this back in 2009, odds are good he could have sold it to some folks in the Middle East and Europe as a substantial shift while simultaneously reassuring Israel 'n friends that it wasn't a big deal. Indeed, one of Obama's chief talents as a political speaker had been his ability to speak ambiguously in lofty rhetoric while convincing folks he was 'really' on their side. But that magic has long since faded.
In any event,from what I can tell, the reaction from Orthodox Jews who previously supported Obama (which was actually a reasonable chunk, particularly of the over 50 crowd who have been traditional Dems) has been extremely negative. Even the folks who supported Clinton's Mid East policy and cannot imagine voting Republican have been questioning whether they can support Obama in 2012. Why? Because the way Obama pitched this and the past cold shoulder treatment for Netanyahu have eroded any belief that Obama would support Israel keeping the Old City and other holy sites. Further, even if Obama is not pro-Arab and actively wants to destroy Israel as their Republican friends keep insisting, they no longer believe Obama cares about Israel's security.
Meanwhile, on the Palestinian side, it all gets dismissed as empty rhetoric -- especially in light of the stunning rejection of Obama's position and the embrace of Netanyahu by Congress. To the extent Obama still has any personal credibility in the Arab world (where it is routine to regard the entire rift between Obama and Netanyahu as a deception to hide the fact that they are planning together to round up Palestinian babies to use their blood to make matzah) I expect that even Obama's supporters don't believe he can deliver for them.
Meanwhile, J Street has done an abysmal job drumming up public support and demonstrating the validity of their claim that the majority of American Jews support a shift along the lines proposed by Obama -- a demand for a settlement based on the 1967 borders and holding Israel more accountable for its treatment of the Palestinians. Now as a long term political activist I recognize the huge challenge of swimming up hill against a preconception in the popular press, coupled with how badly this Administration works with its allies. I also know that none of that matters. When the moment comes, you either deliver or you don't.
So far, J Street has failed to deliver in any meaningful way. This organization has been around for what, 4 years now? According to its web site, it's PAC and org have raised a boatload of money. But it has been unable so far to inject itself into the national debate. Who the heck do these guys have working press and/or grassroots outreach? After four years, you bloody well should have a decent network that can leverage a moment like this. And if you don't, then you are going to get tossed aside (at least for the short term). No, excuses do not matter. In the political arena (particularly with this Administration, whose need for political support is positively insatiable) you either perform or go back to the farm leagues.
Not that J Street can't learn from this and grow their shop. But they need to invest about 5 or 6 figures over the next 2 years on developing media strategy and mobilization. Unless something dramatically changes, I do not see them becoming a significant force in U.S. politics any time soon.