The two-state solution is still viable; the only thing that has changed is that the West Bank will not be part of the Palestinian state. The Palestinian state will be in Gaza, probably after a protracted period as an Egyptian-administered protectorate. 

Israel will annex the West Bank, and some Palestinians will be allowed to stay and become Israeli citizens. Palestinians who have demonstrated sympathy to Hamas or other terrorist organizations will be transferred to Gaza or allowed to relocate to Jordan. In the end, Israel will still have a substantial Jewish majority.  

The Arabs started a war, they lost the war and they lost territory. Then they refused to negotiate a surrender for sixty years. The former combatants have abandoned the territory and its residents. Israel can't wait forever. It is time to settle the status of the abandoned territory unilaterally.

The Arab nations will make protesting noises, but they'll be happy to have the thing out of the way.