The next act of terrorism, I'd send in troops to evacuate the town the terrorists came from. I'd expell every person who lived in that city. They would be forbidden to return to the West Bank or Gaza. Then I'd send in the bulldozers.
By the third city the Palestinians would be hanging their own in an effort to stop the terrorism.
That's what I've been saying for about a year. At this point I wouldn't bother with expelling them. Just carpet bomb, bulldoze and build new Jewish cities on the site.