Andrew Sullivan considers a One-State solution based on a poll that says that Palestinians would be interested in it.
The thing about terrorism, though, is that it does tricky things to the idea of democracy -- a majority of people can want something, but a minority of armed thugs can easily destabilize it. If Israel annexed Palestine and gave citizenship to the Palestinians in the West Bank, maybe a majority would agree (I am highly, highly doubtful) but the minority who would oppose it is fairly large, and I have a feeling it would be a fairly acrimonious situation.
Lebanon might be another example of a nation in the region that tried pluralism, but a vocal (and violent) minority destabilized it. With a little help from Israel and Syria.
If there was a three-state solution, wherein Israel and Fatah-administered West Bank were able to form peace, the next step would be, perhaps, a loose federal system that coordinates the two. A slow, long-term process towards a one-State solution, since unlike Zionists I believe that a nation built on a single racial, religious, ethnic, sexual, or any other identity is going to become an inherently unequal nation.
