I think it's debatable whether Jewish Israel "took away" land from the Palestininans - settlements of European Jews were usually in Jewish areas of Palestine or in land bought from Palestinians. Muslim Palestinians usually weren't forced out, they just sold their land and used the money to live in a so far unused part of Palestine, or in a Muslim city.
Afaik, the 1948 war arose not even over Israel's independence - it arose over the question whether to allow the Jewish parts of Palestine unlimited immigration and whether to allow the Jews to buy Muslim owned land. Israel might just have become a state in a Muslim/Jewish federation, had the Muslims simply accepted a development which would not really have affected them in the long term anyways - there's only a very limited number of Jews on the Planet. Even if all of them came to Israel, the population balance in the area would still be in favor of the Muslims.
The existence of Israel as a Nation was a pretty unplanned result of unnecessary hostility, even though quite a few Jews would obviously prefer an independent Israel over a Jewish state in a Palestinian federation and were working towards that. But I'm pretty sure less nationalistic Jews, the English, and obviously the Muslims would have preferred the more moderate solution. A nation of Israel might have developed from that over time, but I see nothing bad in a development were a part of a country believes it's better off without the other part and declares independance - something like that shouldn't bother anyone, and I really don't understand what makes anyone think differently.
Also, what about all the land and homes Arab Jews had to leave after the creation of Israel? That's a real crime, but is hardly mentioned by all those self-proclaimed protectors of the poor innocent helpless Muslim Palestinians...
By now, after a few wars, usually initiated by surrounding Muslim states, the Muslim parts of Palestine are actually really bad to live in, with a lot of injustice happening. I'm just not sure whether the lives of the Jews in the area would be better if somehow the Muslims had won in one of those wars...
And when a Christian Europe gives Palestinians millions not only for food, but also for weapons each year, thus keeping the Palestinians from ever having to give up their intolerance against a Jewish state, then I'm not quite sure whether that's really humanitarian...
Did I also mention that surrounding Muslim countries do their best to keep Palestinians from coming to their places, even though there's more than enough unused land in most of them? Muslims seem not to be much better towards their Muslim brethren from other countries than Jews are towards Muslim Palestinians.
I'm pretty sure that both Europeans and Muslims help fuel anti-Jewish sentiments - the Europeans maybe mostly out of naivete, but the Muslims openly to increase their power over the area and to fuel anti-Jewish aggressoion - even at the cost of the Palestinian Muslims.
Thanks to not only Muslim animosity towards Israel, I don't believe it can survive forever as it is - even though, imo, it did nothing wrong. It let people in who needed a home, and was, for this "crime", subject to hostility during it's whole history. I don't see anything peaceful that can be done in this situation. Neither a retreat to the green border, nor even giving up Israel as a nation and making it an equal state in a Palestine federation would by now reduce tension - as it seems, it would only serve to justify even more aggression, as it would be seen as a Muslim victory.
If Israel had been carved out of parts of Germany, the much larger Christian population would always loom as a threat over "Yiddland". Also, in a Christian Europe, the Jews would always be seen as different from the rest of the continent. I suppose the only manageable way would have been to carve out a land for all the people who were hit by the intolerance of the Nazis - but that would leave Germany pretty much forced into playing the evil Nazi role eternally. All that in a world which usually sides with the aggressors and only has sympathies for the underdogs.
Real justice might have been to get the Germans into a situation like living among hostile surrounding nations. But unluckily, with about 60 million Germans at the time, of which less than 10% (another 20% being dead or abroad) would probably qualify as victims of the Nazis, there are not many places where the Germans could have been taken to. Not to mention that Christians usually wouldn't do that even with extremely bad Christians, that there were geopolitical interests considered far more important after WWII, and that it would cost astronomical amounts of money.
All in all, the fate of Judaism seems to be the fate of those who are a religious minority. Additionally, the rules of later religions (Christianity and Islam) often make their members succeed against the members of an older religion (Judaism), by using their peculiarities against them.
It's also unrealistic to assume Jews could just adapt their religion and suddenly become more popular - a more aggressive approach like that of a religion founded by a warrior would not be taken very well by the world community (see Sinai peninsula), and copying parts of Christian religion would be seen as subjecting to that. It's also unlikely that the Jews could suddenly convert millions of people to some form of Judaism - just look at what happened when millions of young people in the west showed sympathies with Baghwan.
As it is unrealistic for the world's religions to suddenly become tolerant towards other religions, or even become unimportant for people, like astrology, there's only eternal struggle. May the better one win.
! Anyway I signed up a couple of days ago, so I figure I might as well post something- halfassed though it will likely be-so, here goes.