Israel was attacked at least twice by Arab forces prior to the 1967 war. Wars have consequences. The Arabs lost the land to the Israelis and the Israelis obviously need it as a buffer between themselves and the same Arabs who have repeatedly tried to kill them.
If you take all the Arab countries and say that they are the size of a desk, then Israel is the size of an envelope on the desk. Why is it that the envelope has to fit all the crazy Palestinians in it. If these people are so great - let the Arab countries take them in.