I believe that it's going to become undeniable over the next couple of years, that the Palestinians should be kicked off the West Bank and Gaza. No matter what Israel does, the Palestinians will never live in peace beside them. If the Palestinians allow rockets with increased capabilites to be launched from their territory, it will be impossible for Israel to ignore it, and the implications.
Any attempt to expen 3.5 million Palestinians from the territories will be met with the same response Serbia received when it tried to expel Albanian Muslims from Kosovo: a massive US-led military response against Israel. There is no way that the Palestinians can every be expelled.
Mass transport is indeed the only solution, although considering the numbers involved it's going to have to happen after a negotiated settlement -- a monstrous payoff (on the order of $100 billion) to one or more Arab countries to take them in.
Can't see it happening, though. Not only does the majority of the Arab world despise the Palestinians but Arab dictatorships would lose a very powerful tool (that they've successfully used for decades now) in being able to redirect the anger of their crazed populaces away from the corruption that exists within their own ranks and onto an external source ("The Zionist Entity").