By the PLO abandoning terrorism it made them look more civilized on an international stage. They gained a massive amount of credibility and looked more like an organization that could be reasoned with instead of shot at. Also, this gave Israel less fire power on a world stage to keep fighting the separation of a Palestinian state because it couldn't make the excuse of crimes against humanity that they had used prior to the PLO's decision.
By abandoning its terrorism campaigns, the Palestinian Liberation Organization gave itself more legitimacy, and has advanced the cause of Palestinian statehood. As a matter of policy, Israel will not negotiate with terrorists, nor will it allow itself to be coerced through terrorism, so terrorist acts by the Palestinian Liberation Organization were self-defeating and counterproductive.
I definitely think that the Palestinian Liberation Organization's decision to give up terrorism did help the cause of Palestinian nationhood. I think that the decision helped other nations to give the PLO more credit when it came to their claims that they wanted peace the opportunity for the Palestines to have their own nations.
I don't think terrorism is ever the solution to achieve your political goals, while the Palestinian Liberation Organization has been effective at their terrorist methods I don't think it would have ever been beneficial to Palestinian nationhood, I think diplomacy and a peaceful approach is much more effective way of doing things.
The PLO's decision to recognize Israel's right to peacefully exist is undermined by the PLO's internally contradicting opinions about which territories, namely the West Banks and the Gaza Strip, should make up the Palestinian State. Some members of the PLO even feel that it is necessary for Israel to be destroyed. As a result, many nations feel that the PLO must be reorganized before it is suitable to establish a Palestinian State.