M. Qaddafi, the Libyan leader, has an op-ed in the NY Times in which he makes a case for a "one state solution" to the confict between Palestinians and Israelis: http://www.nytimes.com/2009/01/22/opinion/22qaddafi.html?_r=1&ref=opinion
I don't see anything in the essay that I can argue with, and I have long believed that there is no good reason for the territory that comprises Israel and Palestine to be separated into distinct polities. As its stands now, the situation is tantamount to apartheid. A single political system would provide a mechanism for the management of conflict and the sharing of power. Of course, advocates for a Jewish state would argue that sharing the state with Gentiles would render the state something other than a Jewish state. That's certainly true, but I for one do not see the necessity for a Jewish state. A homeland, yes. State, not so much, especially when the maintenance of that state entails the disenfrachisement of so many Palestinians.
In the alternative, I would support the "two state solution" if it were implemented in good faith and without regard to the Jewish settlements that have sprung up in Palestinian territory to undermine the peace process. Let the settlers be content with living as subjects of the new Palestinian state if they insist on living in the Palestinian territory.
My personal preferred solution is a single state under a Christian monarch, the King of Jerusalem, the heir to which throne is Her Majesty, Queen Elizabeth II.