James Fallows notes the historically solid track-record of the Nobel Peace Prize:
There are a few choices that look fishy in retrospect. (Henry Kissinger and Le Duc Tho in 1973??? Arafat as co-winner with Peres and Rabin in 1994?) But the great majority stand up very well. Desmond Tutu, and then Mandela and deKlerk. Albert Schweitzer. George C. Marshall. Lech Walesa, Willy Brandt, and Mikhail Gorbachev. The Dalai Lama and Aung San Suu Kyi. The Norwegian Nobel Institute has earned the benefit of the doubt for choosing people whose achievements will stand up over time.
I don't really know what the state of play was in 1973, but even though the '94 Nobel looks bad in retrospect, it doesn't seem like that bad a mistake. Rabin was murdered, Peres lost the election, we had the bad faith of the Netanyahu years, and then Arafat walked away from the table in 2000 but that sequence of events wasn't inevitable; rather, Israel-Palestine in the 1990s brought forward several good candidates for the hypothetical war prize for scuttling a once-promising peace process.