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Back in the 90s our model UN group had to go over this conflict at a high school level. We eventually decided to have the Palastinians abandon Gaza and move everyone to the West Bank as a full country with a mile to three wide zone were no one was to live. As the trust between the two countries increased the zone would gradually go to Palastine. I dont't recall what we did about Jeruselum. I'm sure it was a compromise of some sort that both sides didn't quite like, but was acceptable with the ending of Jewish settlements in the West Bank, the annexation of Gaza to Israel, and the ending of the terrorism.
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