A few people have actually figured out what the solutions to Israel's problems ought to be:
I'm not sure how useful a solution where you annex people's land and immediately give them the franchise will be. The Arab inhabitants of the west bank don't want to be part of Israel, AFAICT. This would have been a great solution in the early 1970s.
I'm not as invested in Israel as state with a Jewish character as most Jews I know are, but people wh are so invested will also not be willing to go along with this. Even my own desires (Friday and Saturday as the weekend instead of Saturday and Sunday, Jewish holidays to be the 'national calendar' in the way that Christmas, Thanksgiving, and Labor day are in the US) may be too much for people who find it necessary to make very clear that the new Israel is not 'a Jewish state of all its citizens' but rather an American style non-ethnically based democratic state.
On the other hand, as Aral Vorkosigan said "Between justice and genocide there is, in the long run, no middle ground". But until we have evidence that our Author is as well intentioned as Bujold, I have a hard time seeing how we can successfully assimilate a resisting populace.
There are actually getting to be more palestinian thinkers who want to reject a two state solution specifically because they prefer annexation and Israeli citizenship. I'm sure the palestinian on the street doesn't think that way, but I suspect that's mostly because he doesn't think it's a possibility.
There don't seem to have been major problems in East Jerusalem, and it seems a noticeable number of palestinians there wanted Israeli citizenship:
As for Jewish character, I think that can be maintained almost as easily in a state with a 30% palestinian population as with the present 17% population, the figures given in the first link of the original post.
The key reason this is possible now and not in the past is the cultural split that has happened between Gaza and the West Bank. Include Gaza, and the number of palestinians is too large. Include only the West Bank, and it's manageable.