Israel holds the position that property rights from before 1948 are still enforceable when Jews benefit from the situation. The problem being that there are LOTS of Israelis living where Arabs did before 1948. Ooops. Getting rid of the Settlers would be a big plus for Israel. And the Palestinians might be willing to enforce the law when Settlers break it.
Ex-FM Lieberman: Firebomb attack in Jerusalem a reminder that norm is Arab terror against Jews (Haar
from the article: Peace Plan: Trading settler Israelis for refugee Palestinians