BBruce - much of our discussion centres round politics and things like who did and said whta first. But you touched on a more fundamental topic though, and for me it presents one of the most perplexing philosphical contradictions regarding Israel.
First off I should say that until a number of years ago (mainly as it kept popping up in the news) I rarely gave Israel / the region much thought. I had family members and relatives and friends who'd spent time on Kibbutz there, and that was about all I heard of it. But the more I looked in to what was happening there and trying to understand why, the more the perplexing philosophical probelm presented itself to me:

You touched on I when you mentioned the term "Arab-Israelis". You say "Other terms used to describe Arab citizens of Israel include "Arab Israelis",[18] and "Palestinian Arabs in Israel"
This is the first clue as to the real nature of Israel as it stands at present. We have words here for people who were not born in Ireland but who live and work here. We call them immigrants, or Poles, or Lithuanians, or whatever their nationality. But once any of them get Irish citizenship, we simply call them 'Irish'. We do not (as far as I know) have words like "Black-Irish" or "Hispano-Irish" etc., - just "Irish". If a 'black' guy (sorry, I hope that term's Ok) is playing on the local GAA team, what matters is his playing, not his skin colour.
So,the mere fact of having a term like "Israeli-Arab" points to the sectarian and divided nature of the Israeli state.

But there's more. You described how "The present-day insistance on a "Right of Return" by Palestinians is a transparent attempt to eliminate Israel by means other than war. If all the refugee Palestinian Arabs, and their descendents, are given the right to return to Israel, then Israel quickly becomes a country with a Jewish minority. The majority Arabs would put an end to Israel without delay"

I once read an article by a journalist here making the same point.
I hardly need to point out how it would be percieved if I were to argue in the press that "the Irishness of our state will be threatened if we allow all these blacks and Poles and Russians in" - I would be quickly tarred and feathered for my racist views! Or if I argued that the "Cathlocisity of our country will be destroyed if we allow too many Jews or Prods or Muslims in" - I would be denounced for my intolerant sectarian views!
Indeed we criticise the northern unionists for cretaing a sectarian 'protestant state for a protestant people' precisely because of its implied disenfranchisement of those who did not fit the bill.
So, as I read it, it struck me "My goodness! What he seems to be saying is that Israel is a racist theocracy, since it is a Jewish state for a Jewish people only - as Jewish connotes both ethnicity and religion!

A similar argument now rages in the UK. It has a significant muslim population and now UK leaders (Brown, Blair etc.,) are marching on the path of forced integration ('make muslim women take off that veil' / 'make them take UK citizenship classes so they can learn what it means to be a loyal UK citizen). There are dire warnings about Britain becoming a Muslim country (!)

But then I thought, isn't that what our much-vaunted democracy is supposed to be all about? People choose the form of government and society they see best fit. If the British people want to vote to become a Muslim nation, then isn't that their democratic right?
If Israel becomes a Muslim nation - isn't that an expression of the democratic will of the people that must be respected?

I should make a point here though - I, for one, have no wish to live under a sword and sharia law (as in Saudi Arabia, another racist theocracy). I would not like the cramp on my freedom, including my religious freedom. But there are secular Muslim societies, such as Turkey (not without its human rights abuses though) and even Western-style democracies like my own are rampant with corruption and have v. have nots.

But we, in the 'West' trumpet a secular democratic model as the ideal society to the point where we are willing to invade Iraq and Afghanistan in order to bestow its 'benefits' on those countries at gunpoint (the irony is not lost on me). We promote it heavily and practically bully other countries to adopt it. Yet when democracy produces results we do not like, such as a possible Muslim Britain, or Hamas representing the Palestinians (for whatever reason, as you have pointed out ;-) ) we decide democracy must be rescued from itself. A classic example here was when a referendum on an EU treaty did not produce the desired result in Ireland, so the government simply decided people would keep voting on it until they 'got it right'.

I would be in favour of McGrath from Harlow's solution - a one-for-all state: a big geographical area that encompasses Jew and Muslim and Arab alike. As long as this state protects the welfare and democratic rights of all its citizens, there should be no need to worry. If one group starts dominating or discriminating against another, we have the means to step and intervene, if we have the political / moral will to do so, true?

Any thoughts?