Philosopher,
You are wrong.
The Palistinians were absolutely NOT citizens of Israel before Oslo. Until Oslo they weren’t citizens and there wasn’t even a recognized representative to negotiate with. They were just stateless people living in refugee camps.
Your also wrong if you think that Israel could absorb about 4 million Arab citizens (that’s about the amount of Palistinians living in the West Bank and Gaza) and still keep it’s Jewish character. All Jewish specific parts of the state would be voted out within a couple years.