This is an interesting point. It's always been part of the negotiation that Israeli settlers won't be allowed to stay in what becomes Palestine, and yet it seems out of the question to expel Arabs from Israel. This makes sense, of course. Arabs know they're reasonably safe in Israel and have political rights. Everyone knows that Jews who remain in the new Palestine without Israel's explicit protection will be massacred.
But think about what this implies.
Yes, that's true. How then should Israel go about giving away their land to "palestinians" for a 2-state solution knowing full well it would result in mass Jewish murders?
So, are we just supposed to pretend the occupied territories are a part of Israel now, that it can keep them or give them away as it wills? I ask this because no one recognizes that to be the case: not any international body, not any other country, and not even Israel itself - in fact, that's the position Israel's own Supreme Court has consistently maintained since 1967.
Further, as I and others have mentioned before (and you can see more details in my response above, in point 2), the Palestinian position is that they are open to the idea of land swaps, which, in effect, would translate into the most populous Israeli settlements in the West Bank being annexed by Israel, and an equitable amount of Israeli land being offered in return to the Palestinian state.
But, this is all mostly academic, of course, since Israel doesn't want the two state solution (or the one state solution), and has in fact been working very hard to prevent any such solution from ever taking place - my previous posts in this thread have paragraphs, after paragraphs detailing some of the ways they went about doing so (and providing sources where anyone can read more about it, if they are interested).