I do have an idea. Of course, it is easy for me to have ideas half a world removed and with no visibility nor power to speak of.
I think it is necessary to cultivate mutual acceptance in both sides, and it is far harder to achieve than it is usually admitted.
I know that it is a very hard sell, but I would encourage very open diplomatic pressure with some sort of incentives (probably of a financial nature) in exchange for acceptance of... well, of a mutual limited-period hostage program with pre-established goals of geometric progression for numbers of people, period of time, or both.
Apparently against the grain, I do not support seeking sovereignity. I do not believe that sovereignity exists or is worth of any attention whatsoever, for anyone. Same with self-determination and even nationality. Those are political fictions and I do not like to waste time with political fictions. I am not hoping for a two-state solution, mainly because I think that has been tried repeatedly since 1947 and has become quite the poisoned pill, particularly for the Arabs.
I do believe that there will be no peace in the Middle East while Israel is surrounded by Muslim communities, and that the only true solution is to talk people out of Islam entirely. I do not expect to earn friends among Arabs or Muslims by saying as much.
Regardless, there is an essential assymetry at work here that must be addressed. Israel has undeniable military superiority and as result received much (IMO far too much) of the criticism. That may be somewhat understandable, but I also think that it is very naive and unfair.
Yasser Arafat famously said that "The womb of the Arab woman (was his) my strongest weapon." I can hardly find it in me to condone Israel's recent massacres, but it is not like the neighbors have consistently been reasonable.