Why The Settlements In East Jerusalem?

Hmmm. I have no idea, do you? But here's a Nexis story from the WaPo in 1994 that helps provide some historical context:

On the map, Maale Adumim is a settlement built on West Bank land that Israel captured in the 1967 Middle East war. But for Raanan, it is not. "It is Jerusalem," she said. Raanan is at the vanguard of a long-planned and ambitious drive by Israel to fortify the area around Jerusalem with expanded Jewish settlements. While the government of Prime Minister Yitzhak Rabin has curbed settlement building elsewhere in the West Bank, the vision of a "Greater Jerusalem" - a buffer zone of Jewish habitation around the city - is coming closer to reality every day.

Nah that couldn't be it, could it? From another WaPo piece in 2004:

Israel is close to finishing a decades-long effort to surround Jerusalem with Jewish settlements, walls, fences and roads that will severely restrict Palestinian access to the city and could reduce the chance of its becoming the capital of a Palestinian state, according to documents, maps and interviews with Israelis, Palestinians and foreign diplomats.

... Projects to cut off access to Jerusalem to Palestinians living in the West Bank, which borders the city on three sides, have accelerated since the start of the current Palestinian uprising in September 2000. Today, Jewish settlements outside the city have been integrated with the urban core, redrawing the map of Jerusalem and complicating any negotiations over its future and the future of West Bank settlements, Israeli and Palestinian experts say. 

The web of projects includes 13 settlements to the north of the city that are being linked with each other and with Jerusalem by access roads that act as physical barriers to Palestinian communities. To the east, Israel has approved expansion of the West Bank's largest settlement, Maleh Adumim, to absorb a swath of Palestinian land between the community and East Jerusalem. To the south, access and bypass roads and Jewish settlements have carved Palestinian lands into a checkerboard...

Avraham Duvdevani, head of the settlement unit of the World Zionist Organization (WZO), which implements the Israeli government's settlement program in the West Bank, said that the aim was to consolidate the capital of the Jewish state. "It's been the formal policy of all governments in Israel that Jerusalem will not be discussed or divided -- Jerusalem is the capital of Israel, to stay undivided forever," Duvdevani said. "Because of that, it was very easy to get permission from the minister of defense and the governments to build settlements that strengthened Jerusalem as the capital and the Jewish majority in Jerusalem and that blocked the option of the Palestinians to build in and near Jerusalem."