The bolded part is unacceptable, they are the occupiers, so eventually they have to accept that they cannot just have a state with their name and under their authority, its simply unacceptable.
Just because the newer generation of Israelis were born in the land their fathers and grandads occupied, does not give them a right to it at all. If they want to stay under Palestinian authority, they are welcome to. Though like i said, i doubt that is practical, there is way too much history and bad blood between them and the Palestinians, i am sure they won't be treated fairly under Palestinian authority.
So maybe them moving out isn't such a bad idea.