Israel says that if the case against it gains steam, the Jewish state will not be able to make the wide-ranging concessions necessary for any peace deal. Hamas, the militant group that violently seized control of the Gaza Strip more than two years ago, is reaping benefits from the report's fallout, while shrugging off the serious allegations the document makes against its own fighters.
Mahmoud Abbas, the Western-backed Palestinian president whose forces hold sway in the West Bank, has been seriously weakened by perceptions among his people that he caved in to U.S. pressure over the affair.
The 575-page report accusing Israel and Hamas of war crimes during last winter's war in Gaza _ compiled by the respected South African jurist Richard Goldstone _ has largely overshadowed an aggressive U.S. drive to bring Israelis and Palestinians back to the negotiating table.
A month after the report's release, Israeli leaders are denouncing it daily and speaking about little else.
International condemnation of Israel is gaining momentum, meanwhile, with two U.N. debates on the Goldstone report scheduled this week.
Of the report's many unintended consequences, perhaps none was as noteworthy as the fallout from Washington's decision to pressure the moderate Palestinian president into backing down from a demand to press the case against Israel in the United Nations.
While the Palestinians have since reversed course and the case is going ahead this week in New York and Geneva, the damage has already been done. Abbas has been vilified at home as a sellout, and his Hamas rivals are taking full advantage.
U.S. officials argued that pursuing the case against Israel would hurt efforts to restart Israeli-Palestinian peace talks. Paradoxically, however, Abbas' initial willingness to go along with that line of thinking has hurt peace efforts, as his domestic standing has been eroded at a time a strong Palestinian leader is required for peace negotiations.
Israel, infuriated by the report's allegations that it deliberately targeted civilians in its quest to root out Palestinian rocket launchers, has begun a diplomatic blitz to counter the criticism.
Defense Minister Ehud Barak called the foreign ministers of France, Britain, Spain and Norway ahead of a debate beginning Thursday in the U.N. Human Rights Council in Geneva.
"The world's democracies must understand that adopting the report would badly compromise their ability to deal with terror organizations and terror overall," Barak said in a statement Wednesday.
One of the reasons the report has caused such an uproar in Israel is its author's background. Goldstone is Jewish and has supported a number of Israeli causes, including serving as a trustee of the Hebrew University of Jerusalem.
Israeli Prime Minister Benjamin Netanyahu, aware that the proceedings could lead to war crimes trials against Israeli leaders, opened a keynote address to parliament this week by vowing never to allow that to happen and characterizing Israel's actions in Gaza as self-defense.
"Israel will not take risks for peace if it can't defend itself," he said.
Palestinian leaders say Israel's right-leaning government currently isn't taking any risks for peace anyway.
"The way I see it, (the Palestinian Authority) has nothing to lose going forward with this report," said Palestinian government spokesman Ghassan Khatib.
Earlier this month, Abbas' government agreed to delay a vote in Geneva that would have moved the Goldstone report up the U.N. hierarchy, the first of many steps toward possible war crimes trials.
Hamas responded with increasingly harsh attacks on Abbas.
At one ally in Gaza last week, demonstrators threw shoes at a large poster of Abbas. At another, they carried a coffin covered with photos of him, then burned it.
Abbas tried to control the damage, and on Sunday, he said he would renew the push to have the report voted on.
Palestinian Prime Minister Salam Fayyad on Wednesday acknowledged that the affair has caused "major weakness" for Abbas and "certainly strengthened the hand of those who do not subscribe to our point of view."
The U.N. report also appears to have damaged the prospects of Palestinian reconciliation, just as the sides appeared to be moving closer to putting more than two years of division behind them.
The report also criticized Hamas, accusing it of targeting civilians and trying to spread terror through its rocket attacks on southern Israel. Hamas has brushed off the charges.
Hubbard reported from Gaza City, Gaza Strip. AP writers Mohammed Daraghmeh and Michael Barajas contributed to this report from Ramallah.