I could be wrong but my impression is that no matter what Israel agreed to, her enemies would keep demanding more and fighting until there was no Israel and no Jew left in the area.
I don't think that impression is right. Besides israel is strong the arabs are week, and the arabs are more likly to fight each other.
Besides you have to remember that close to a quarter of israel's population is arab, and most of that being muslim arab. Peace between the people is possible, its not a silly stoned hippy pipedream.