Because one holocaust is enough. The Jews are in Israel to stay - with US force of arms if necessary. The Arabs had better get used to it.
Israel will need to abandon most of its settlements in the West Bank however.
I think the Israelis are in big trouble. Demographic and economic trends are against them. The Palestinian population is growing, while wealthy and educated Jews are leaving Israel. Israel has a net Jewish population loss, with emigration far exceeding immigration. The only Jewish demographic that seems to be increasing are the ultra-Orthodox, who politically tend towards the far-right.
Meanwhile, on the economic and security front, the stable neighboring regimes with whom Israel had reached a generally peaceful modus vivendi are increasingly volatile. (Egypt, Syria, Jordan.) And at the same time, the United States, which provides a great deal of support to Israel's military and economy, is finding itself in an increasingly precarious position.
While I don't forsee any immediate changes, in a few decades Israel is going to find itself in much the same position as the apartheid government of South Africa did.
