Caroline Glick wrote a book arguing for something similar to Joseph’s idea, except that Gaza would become part of Egypt. She says Yehudah/Shomron Arabs would have the choice to become citizens, and many would choose to, but not all, and with increased aliyah there will still be a substantial Jewish majority in the entire state. That’s her idea.
There are other options than the ones that have been mentioned.
For example, there is an option that you could call the Puerto Rico or Greenland solution. All of Israel would become one state under Israeli law. However, those living in Palestinian villages would be able to vote in local but not national elections. It is basically the same for Puerto Ricans and Indians living on Indian reservations in the US, and no one ever complains about that. Some would call this “apartheid,” but really, many countries have territories in which people can vote in local but not national elections.
Even better would be the Jordanian solution, in which Jordan (which is already 80% Palestinian) declares all Palestinians to be Jordanian citizens, who can vote there even if they don’t move there, and who can move there if they want. In practice, many Palestinians will stay in Israel to work, but they would be citizens of another country, so they couldn’t vote in national elections. This would deal nicely with the demographic problem while also ensuring they have the rights of full citizenship (for one country).
The main thing Palestinians complain about (aside from the existence of Israel at all) is restrictions on moving around, checkpoints, etc. But those things would all go away if terrorism stopped–their only purpose is to prevent terrorism. Once incitement to terrorism is actually illegal and enforced, and Palestinians give up their anti-Semitic and pro-terrorist ideologies, then Palestinians who remain can be just like Israeli Arabs, who can go anywhere they want. Privately, many Palestinians will admit they prefer being ruled by Israel directly rather than by the PA, since PA is corrupt and incompetent while Israel has a decently-run government.