Israel's status quo seems to be trying to do both make a 2 state peace and push Non-Jews out. The Christians tried to push all others out 1000yrs ago and it worked for almost 100yrs but fail in the end. The Palestinians and Muslims in general have had very poor leadership for most of the last 100yrs but at some point that could change as history as shown. Israel must show equal rights to all it people or in the end it will be costly, while Muslims in Israel may have it better than others, they are still seen as second class may many.
Australian police arrest 5 over shooting 'linked to terrorism' (Reuters)
from the article: Israel's financial success can't overcome political despair