In the first place, TEXT of the agreement contradicts both the spirit and the implementation of the Peel Commission recommendations. As do the statements of the Zionist participants in the commission in the late 1930s, who explicitly stated that their goal was a Jewish state in ALL OF PALESTINE.
As Ben Gurion himself put it:
"The compulsory transfer of the Arabs from the valleys of the proposed Jewish state could give us something which we have never had, even when we stood on our own during the days of the First and Second Temples:
a Galilee almost free of non-Jews."
Under the 1920 agreement, they were supposed to share the land and work together for co-development. By the 1930s, the Zionists had other ideas.
Most reasonable people seem to agree that the antagonism during the '20s was the cause of this agreement breaking down, and due to the escalating nature of the events that a one-state solution would be unworkable.
Which is supposedly one of the reasons the Zionists rejected the idea, much to the chagrin of the Arab leaders who were still hoping to tamp down those hostilities and form a plurality.
The problem is, even in the 1920s there was a growing presence of Zionists who weren't interested in plurality or in co-habitation with Arabs. A large number of them were openly antagonistic to their Arab neighbors, which lead to both racial and religious tensions and ultimately to mutual vandalism, street fights and finally to riots. By the 1930s, the hardline Zionists, rather than work to reduce tensions and call for reconciliation, seized the opportunity presented by the unrest and argued that Arabs and Jews shouldn't
have to cohabitate, and if the Balfour Declaration was to be implemented, the Arabs would have to be separated. The Zionists weren't happy about THIS idea either, but as Ben Gurion later argued, getting half of the land all to themselves was better than having to share all of the land with Arabs.