"The Palestinians had their chance at a contiguous state in 1947"
Not really. "The Palestinians" is not the same as the small number of elite corrupt people that were given the choice.
Certain elements in Israel see the Palestinians as a problem they wish would just go away. To punish them en masse for the problems of their so called leaders is a poor attempt at taking the moral high ground while avoiding the responsibility of solving the problems. If Israel claims that piece of land, and claims to be a democracy, then they should look after the people born and raised on that land and treat them like citizens. If they don't, they shouldn't claim it, or divide it with settlements.