Israel wants to keep parts of the West Bank where majority of population is Jewish. 
Arab population in Palestine is not growing faster than Jewish population in Palestine. There is no demographic bomb hanging over Israel. 

The option that is not considered now is a return of portions of West Bank to Jordanian rule, together with UNWRA money, to make this project feasible. This simple step should solve the whole problem. Half of the Jordanian population are Palestinian Arabs anyway. Same language, same religion, same culture, even same textbooks.