The future of Israel and the West Bank: Jewish state or democratic state?

Jeffrey Goldberg, on his blog for The Atlantic, raises a question about the future of Israel:

…. there's very little Israel's right-wing government has done in the past year or so to suggest that it is willing to wean itself from its addiction to West Bank settlements, and the expansion of settlements bodes ill for the creation of a Palestinian state -- and the absence of Palestinian statehood means that Israel will one day soon confront this crucial question concerning its democratic nature: Will it grant West Bank Arabs the right to vote, or will it deny them the vote? If it grants them the vote, this will be the end of Israel as a Jewish state; if it denies them the vote in perpetuity, it will cease to be a democratic state.

The West Bank, the landlocked territory between Israel and the Jordan River, has been under military occupation by the Israeli army since 1967. That military presence was somewhat reduced following the 1993 Oslo Accords. As of 2007 the Palestinian Arab population was 2,345,000. Close to 500,000 Israelis live in the West Bank settlements and annexed East Jerusalem.

An occupation of forty-three years seems hardly temporary but the fate of the West Bank and its inhabitants is still unsettled. Proposals for a two-state solution are not without risk for Israel. A formal Palestinian Arab West Bank state would mean the establishment of a potentially hostile nation on its eastern border with a potentially unstable (given the current state of Palestinian politics) government. However, a one-state solution, whether by formal annexation or by default through unending occupation and expanding Israeli settlements, means a fundamental change in the nature of Israel. The question Goldberg raises above is whether or not West Bank Arabs should be granted the right to vote as Israeli citizens in a single state. A single state solution means Israel will cease to be Jewish or will cease to be democratic.