Build a wall around it, with no doors. Declare the territory the sovereign state of Palestine. If rockets are launched from the sovereign state of Palestine, the sovereign state of Israel should respond with massive artillary bombardment.
No, open door into Egypt. Other than that, I agree entirely.
That is essentially their (Sharon's and now Olmert's) current plan, with the exception of the corridor. Separate Israelis from the Palestinians, declare them a country and then wipe them out when they commit acts of war against Israel.