The problem comes when you want to promote "Jewishness", yet you have 20% of non-Jewish Arabs in the country, who are systematically discriminated because they don't fit into this "Jewishness-promoting" ideology. As this article well explains, only one new Arab town has been created in 62 years and the existing ones are denied permits to expand properly and suit their growing population. That's when segregation turns into something very ugly.
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U.S., allies conduct 22 strikes against ISIS targets in Iraq, Syria (Reuters)
from the article: Segregation of Jews and Arabs in 2010 Israel is almost absolute