Dalai realizes that time is not working to his favor and is ready to yield. IMO HK Model is only his asking price. He is ready to yield considerably more. Even though CCP has said it was willing to give more to Taiwan (i.e. Taiwan can keep its own armed force), it is unrealistic for China to grant Tibet the HK status, as the status quo is different.
Preserving "Tibetan culture, Tibetan environment, Tibetan spirituality" are all fine for CCP. In fact, in recent years there was almost total freedom in China. The fact the there are still kinks in Tibet is due to CCP's suspicion of Dalai himself (Dalai also mentioned suspicion in his interview). However, I do not think it is realistic for religious leader to participate in politics, not just in China, in the USA as well. So the most they can get is, still, a few seats in the election clan like HK has today.
Financially, China has paid and is paying a lot to keep Tibet afloat today. But with tourism and better technology to extract wealth from the plateau, though mainly the potential for tourism, it is unlikely that China will yield that today.
One last note, negotiation also means that the domain of Tibet equates that of the boundary of current Tibet Autonomous Region. A strong reason I found the rumous of 50 provinces (map), which upsets the delicate treatment of ethnic composition, laughable.
Here is Dalai's Time Magazine interview
China's President Hu Jintao is visiting the U.S. at the same time as you are, and you have urged your supporters here not to demonstrate against him. Why?
Since we already have some official contact with the Chinese, we believe it is very important to create impressions that we are very sincere, we are fully committed.
Two weeks ago, the Chinese government said it would allow you to visit your homeland, which you fled in 1959, if you abandoned your pursuit of independence for Tibet. But haven't you long said that you want autonomy, not independence, for Tibet?
Oh yes. The world knows the Dalai Lama is not seeking independence. The world knows. Still the Chinese do not know. [Laughs]
Do you have any heaviness of heart about giving up hope for Tibetan independence?
No. It's not necessary. ......
As far as the future is concerned, look at the European Union. In the past centuries, those nations talked most about their sovereignty. Now, today, the common interest is more important than each individual nation's sovereignty. Tibet is a landlocked country, a large area, small population, very, very backward. We Tibetans want modernization. Therefore, in order to develop Tibet materially as a modern nation, Tibet must remain within the People's Republic of China. Provided Chinese give us a full guarantee of preservation of Tibetan culture, Tibetan environment, Tibetan spirituality, then it is of mutual benefit. [Besides] foreign affairs [and] defense [are] all the things which Tibetans can manage by themselves. Tibetans should have the full autonomy.
(Update) Meanwhile, there is an urgent letter from Kashag, Dalai's official secretariat appealing to non-protest during the Hu visit in US
- "If protests are held, this will give the impression that no Tibetan or Tibet Support Group is taking notice of and carrying out His Holiness the Dalai Lama’s instructions issued in the recent 10th March statement."
If the "challenge" theory ("Can you guarantee peace and no more trouble if we accept your terms?")is the case, we can hope for Dalai's visiting China within the next 1-2 years. Because only when you have something close to a draft agreement, would you answer to such a challenge. Similarly, for CCP, only when it is ready to yield a few key terms, will it offer a challenge as a pre-condition.
p.s. In September 2005, prior to the Katrina-cancelled vist, a similar urgent appeal has been issued, and explained the rationale (negotiation environment) in a little more details.
GVO has nicely linked to this. I guess the issue is better labelled as Tibet Autonomy or simply Tibet Issue/Problem now, given Dalai's Time interview. Otherwise, we are not helping His Holiness in the negotiation table.