I like that solution but lets be honest its not going to happen.
Way too many entities have their eyes on West bank & Jerusalem.
You could make Jerusalem a protected heritage site but West Bank is far gone from ever being resolved.
Jordan, Palestinians, Muslims will always consider West Bank as their birth right & Jewish will say they have bigger claims to it because afterall Islam, Christianity all came from Judaism.
West Bank can’t be given to Palestinians because Israel has invested heavily over the years in infrastructure, roads, houses, colleges, community etc.
The settlers are not living in tents. They will not go.
Will Palestine pay up billions they don’t have to settle the infrastructure cost?
Will Settlers who have been living in their holy grounds accept moving out in expensive Israeli towns after decades? I don’t think so.
Israel whether anyone likes it or not, own West Bank after their neighbours attacked Israel, might I emphasis. If their neighbours wanted peace, they should have kept their armies within their country.
Several times, Israel have offered Palestine statehood. 1947, 2000, 2008 and all three times it was rejected.
That whole area hates Jews; They just won’t come to terms with it.
There is no hope of Peace.
Only way it is going to resolve is for Palestine to accept the Jewish state & live their lives being a citizen of Israel.
Which won’t happen if there is a visible signs everywhere of them being different. Jerusalem represents the biggest indicator.