There won't be any lasting peace with the Palestinians and any 'Palestinian State' will quickly degenerate into mayhem. Violent anarchy, factional fighting, allegiance to clan rather than state and internecine religious slaughter will be the likely outcome with the usual interference from other troublemakers in the region. At best a strongman will emerge and rule through brutal repression. Israel has to walk the media tightrope of appearing to be benevolent and constructive while making hard contingency plans to deal with Palestinian terror and the possibility of a nascent rogue nation less than an hours drive from Tel Aviv. I would be looking for a solution that involved annexing more land adjacent to Israel's narrow coastal strip and pushing Palestinians eastwards into Jordan; harsh, unfair, outrageous? probably all of these things but our first concern should be our own long term survival. If the Palestinians become everybody's worst nightmare they must take their chances.
Police disperse hundreds in brawl in Kafr Manda, northern Israel (Haaretz)
from the article: PlayStation Palestine