ABC News reports:

Israel, fearing it will be blamed for any further deterioration in Arafat's condition, said Thursday it is ready to lift its travel ban and allow Arafat to leave.

...

Israeli Foreign Minister Silvan Shalom said a Palestinian Authority without Arafat could become a partner for peace. "We always said we would be willing to talk to a Palestinian leadership that would be willing once and for all to bring an end to the bloodshed," Shalom told Israel Radio.

Good news all the way around as near as I can tell.