Yep. That's the question I want you to try to answer.
Honestly, I don't have an answer - not yet anyway.
Two positions:
1. People who lived there prior to the establishment of a state, and who did not agree with the establishment of that state and fought it and lost. They have not been able to move from fighting to governance.
2. People who established a state, won their fights, and have been able to move from fighting to governance to develop a peaceful and viable state.
In the middle of these two is a no-man's land and a citizenless people, and unequal rights. The no-man's land is the land that some called "occupied territory" (per international law) and "disputed territory" (per Israel).
The Palestinians regard that territory as their future state in a two-state solution.
The question is - is a nation required to maintain a hostile population.
If the answer were to be "no" - wouldn't that then justify the Palestinians driving Jews out of what they consider their state occupied by a hostile population?
But if the answer were "yes" - then what is the state to do maintain the peace and security of it's citizens? What examples of this have occurred in history?
The problem is human lives are involved in both choices. And in increasing settlement building, Israel is forcing what will eventually be a choice - abandon the settlements or annex the territory.
Perhaps Israel should annex the portion it intends to keep, provide citizenship opportunities to all the residents, and give them a choice of FULL citizenship, not residency - or they can move to what will eventually become Palestine.
Edited to add - I'm throwing ideas out because this is an ethical question I see no solution for.