I think if Israel stated that is the goal, to make Palestinians equal citizens in the larger single country, and had a plan as to how that goal could be accomplished, that would be more constructive than the current stall until things blow up plan. I'd like to think many/some Palestinians would buy in and the rest would get no choice anyways.
This plan naturally involves dismantling the PA and taking complete civilian control over the entire territory including formally annexing it to Israel. It should also include some clear continuous benefits to Palestinians from where they stand today (which is pretty bad, so shouldn't be a problem).
A variation of this plan could be some sort of federation, where the country is "Israel" and there are two states under that country. Not unlike Canada or the US. That could also address the population ratios vs. democracy (just like democracy in the US or Canada isn't a proportional system). So we can have a parliament some fixed representation for different parts. I think Lebanon also has something along those lines. I'm sure over time we'll see coalitions that cross those "state" boundaries.
As long as there's a constitution, and there are the right mechanisms, checks and balances, to maintain that, and enough time to get beyond the current tribal let's kill everyone mindsets, it can work.