Setting Palestinians up in a Bantustan like Gaza exacerbates the problems that Israel and the world are trying (not very hard) to solve. By separating Palestinian and Israeli territory, you’re inviting ongoing disputes about where that territory starts and ends. You make likely continuing military action from both sides against concentrations of the other sides’ civilian population, which wouldn’t even be possible if the populations were commingled into one geographic area. You’re setting up two systems of property rights, so Israelis feel legally justified in taking Palestinian land.

Chomsky pointed out a few years ago that the right solution is a one-state, pluralistic, non-theologically-based one. A multicultural liberal democracy, like the rest of the civilized world. Some parts of the Israeli population see that as betraying the idea of a Jewish state. Some worry that the higher birth rates amongst Palestinians mean that over time power in Israel would naturally transfer away from what would become the Jewish minority. So be it. Theocracies are relics of an older era, and bring nothing but conflict. South Africa tried preserving the rights of the minority by oppressing the majority, and we wouldn’t stand for it then.