Matti Friedman has an interesting article at Time of Israel about how Jerusalem is becoming ever more integrated in the reality, even as "everyone knows" that it must be divided - and that the division contradicts this reality.
What he describes fits into my experience, too. Having lived in Jerusalem since 1967, the past few years have been characterized by a level of cohabitation between Jews and Palestinians and Haredi and secular which didn't previously exist. If anything, Friedman's description understates the reality: it isn't just three commercial areas, for example, where Jews and Arabs intermingle; it's dozens of them. Walk into any large supermarket (not the neighborhood ones) and see if you can disentangle the locals - customers and staff - according to ethnic lines. Nor is it a result of the train, which most Jerusalemites don't use because there's only one (long) line.
My unscientific guess? The fact that the Palestinians of Jerusalem by and large didn't join the 2nd Intifada; then their separation from the West Bank (which hasn't been total), then the mayorship of Nir Barkat, a right-winger hi-tech millionaire who's committed to serving all residents, and various other factors.