Do you think Israel would even agree on the borders of West Bank and Gaza to give them up? That's the problem now and that would still be the problem with that "solution."
If they weren't idiots, they would. The problem with the Israelis is their proportional election system. They have too many parties, and neither of the big ones is ever able to get a majority alone. That means cutting deals with all the tiny ones, even if they only have a few MPs, and most of the tiny ones are rabid religionists who want a greater Israel. The irony, of course, is most of those they represent do not serve in the IDF, don't work, and don't pay taxes.
But as long as the Palestinians have things like "the right of return" as non-negotiable they'll never agree to something like this anyway.
Arafat received almost all his territorial demands at the 2000 Camp David talks and then blew up the deal with adding in the "right of return" at the last moment, as Clinton's presidency was ending. I think that the Palestinian side has shown no real interest in peace. None of the negotiations are over access to water, to ports or anything that indicates that they plan on building a nation. Their plan is apparently to build a springboard from which to seek to annihilate Israel as a Jewish state, and perhaps the Jewish population.
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