Arafat is simply interested in saving himself. He has had almost ten years of freedom to run a petty kingdom and has succeeded essentially in bringing opprobrium and scorn on himself and most of his team; the Authority became a byword for brutality, autocracy and unimaginable corruption. Why anyone for a moment believes that at this stage he is capable of anything different, or that his new streamlined cabinet (dominated by the same old faces of defeat and incompetence) is going to produce actual reform, defies reason.
Said has always been more anti-Israel (and anti-West) than he has been pro-Palestinian or pro-Arafat, but the idiocy of Arafat's strategy since Oslo has led things to such a pass that even Said is pointing out the problems. He's also quite hard on suicide-bombing as a strategy, though an uncharitable reader might conclude that's mostly because he sees that it's failing miserably.
The other interesting thing about this passage is that it's in Al Ahram, which means that the Egyptian government can't hate it too much. And when you strip away the still-present obligatory Israel and America-bashing, it looks to me like another sign that everyone thinks Arafat now represents a problem, not an asset.
UPDATE: A troubling thought. We're getting a lot of cooperation all of a sudden from Arab countries, including places like Syria that haven't been all that cooperative before. It's likely that this is the result of increasing pressure. But given the cooperation between Syria and Iraq on nuclear matters, is it possible they're just trying to keep us out of the picture until the Islamic Bomb is ready in sufficient quantities? I don't think that's what's going on, but such behavior would be very much in character.