In dictatorships you need courage to fight evil; in the free world you need courage to see evil.
The central premise behind Oslo was that if Arafat were given enough legitimacy, territory, weapons and money, he would use his power to fight terror and make peace with Israel.
If you have to fight an enemy at a critical point in time, and you have an ally who happens to be a dictator, you don't say: Let's stop fighting right now, because you're not a democrat. That would be ridiculous.