In a certain way, the 'New City' of Jerusalem is sort of already divided north of the Old City walls. They call it the 'seam line'. Not sure how defined it is south of the Old City walls. But you for sure know when you've crossed it as you walk outside the Old City on the north side. I think the Old City should be as it is, and as I believe I mentioned in the two state solution thread (this one is almost going the same way now), I wish that the Temple Mount would become more open to all. As it is now, Non-Muslims can only enter via one way during very restricted hours. Leaving the Temple Mount for a non-muslim is much easier.