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My mother-in-law is Armenian, and I had a college roommate who is Turkish. So I've got a fair idea of the problem.
The Turks actually did murder more than a million Armenians. They were afraid of the Armenians siding with the Russians in carving up the Turkish empire, which got carved up anyway. And the Armenians were good targets, being generally richer than the Turks. The problem now is that if Turkey admits it, that opens the door to big reparations, and land claims.
If Armenia would give up claims to reparations, Turkey would probably admit what happened.
http://www.boston.com/news/world/europe/articles/2009/08/31/turkey_armenia_agree_to_establish_diplomatic_ties/