Israel can be a democratic state, even as it holds onto all of the Territories. Demographic trends indicate a rising Jewish fertility rate, and a declining Arab one. Giving the Arabs the vote, the Jewish population would still outnumber the Arab one in 2050. This is aside from Israel's legitimate rights to all of the Land.
UN: Gaza could be 'uninhabitable' by 2020 if trends continue (AP)
from the article: Kerry: Israelis and Palestinians have two years to make peace