Regardless of how the former Palestine is organized - legal or illegal settlements, over 100 years of living together has shown that it is not going to work. Either the Jews or the Palestinians must move if there is to be peace. However if the Palestinians move, the Jews will still be surrounded by Muslims. There are 1.6 billion in countries with porous borders.
Fortunately the Jews have shown their capabilities in occupying and developing land. There are a number of countries where land might be acquired that would be suitable. Texas coast comes immediately to mind. Israel is just 1 48th the size of Texas, so accommodating would not appear to be a problem. However Israel was founded because of a piece of land, so feelings are very strong. And the leaders are willing to have their citizens involved in violence for life. For a land of sand. Religion certainly is strong willed.