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HaLeiVi:
I don’t see how piece by piece annexment wouldn’t bring about all the downsides I listed in 2), albeit at an equally slower pace.
The current policy send to be to take it day by day, which is the best approach for now.
The current policy is essentially continuing the status quo in the hope that at some point in the future, a viable solution will present itself. And while I do agree that this is probably the best option (together with effecting changes in Palestinian education and media, as yytz pointed out), it still has the downsides I listed in 3).
akuperma:
It is no longer 1918. Today’s Arabs don’t just want control of “all the territory”; they want us out of it, if not dead. Have you noticed how many Jews peacefully co-exist with their neighbors in territory under Palestinian control today? You cannot rewind history.