Well I agree there is no Palestinian nation. The Palestinian people are not even unified, they are mostly descendants of migrants who moved to the region in the early 1900s. Just like the Jews, who did unify under one flag, one government, one rule of law even though they too came from scores of different countries speaking dozens of different languages.
The issue to deal with though is the fact that they identify as Palestinians now, and they live there now. They want political independence, but they are not unified with one political vision, and scores of different clans and militias rule over various enclaves. So there are only a couple of ways to deal with it. They have to unify under one banner, and then negotiate something. The alternative is just more of the same, or worse.