For anyone that thinks the Jews and Arabs lived peacefully in the Holy Land, before the formal state of Israel:
http://en.wikipedia.org/wiki/1929_Palestine_riots
I cannot help but think that the non-Jews (aka, Gentiles) in this thread, that are burning cerebral calories, trying to figure out what to do with these recalcitrant Israeli Jews, that insist on protecting their citizens, is funny at best, offensive at worst. Does anyone see that the problem exists today, is in great measure due to world opinion just "yawning," so to speak, when over the last several years an Israeli was wounded by a rocket, or an Israeli was found dead near an Arab village. In other words, since Israel did not want to react EACH time there was some act of terror on Israeli citizens, the problem festered, and today has been exacerbated by longer range rockets/missiles that now can have payloads.
So, many liberal peace loving people today might feel Israel, as the victim of years of terrorism, is to blame, because Israel is now forced to deal with a problem that was not addressed for years, partly due to world opinion being what it is.
Anyway, I do not see Israelis going anywhere, since they like having a Jewish country where they do not have to be a deferent minority. The problem only appears unsolvable today, because the perception is that the Israelis are just European Jews living in the Middle East. No, based on a universal Israeli draft, the Middle Eastern Jews, that became part of Israel after the 1957 war, and now comprise more than50% of the Jewish population, meet and mix with European Jews in the Army (as an example) and there are now third generation Sabras that are neither European Jews, nor Jews from an Arab country. Plus, with over 120,000 Ethiopian Jews, it is possible that Jews might one day be the "whales" of humanity, so to speak, since like the whale that went back to the ocean, having once been a land dweller, the Israelis will go back to being a people of color, having once been white. Then the world will see that to take sides in the ongoing conflict with Muslims reflects just a religious war, which it really is today in truth.
Naturally, so much of the world (the Christian world to be exact, in my opinion) would like to disenfranchise Jews from a homeland, since it goes against historical theology where Jews, having rejected Christ, should not have their own country (aka wandering Jew).
I also do not think there are many that would want Israelis as their next door neighbors. Regardless, there is a population of Israelis, I thought, that do have dual citizenship - U.S. and Israel. So in effect, this group has two homelands. But the question is really, in my opinion, do the Muslims get Israel back, so as not to offend their religious belief that the Israeli land belongs to Muslims only (why I say it is now just a religious war - the Jewish homeland perception is just a red-herring for those that would like to disenfranchise Jews in Israel, I believe).
Keep burning the midnight oil. You are doing what was done by generations of feudal princes during the Middle Ages - trying to answer the question - what do we do with the Jews in the kingdom?
And to all a good night (quoting Santa).