The various Arab actors will have to recognise Israel's existence, its not going anywhere. and Israel will have to give Palestinians their own state and stop treating them like dirt.
the way i see it is the following...
Arab-Israeli conflict:
Arab states have started forming this Economic Unity thing started in 1997 and was suppose to meet the goal of having a freetrade area by 2010 (achieved 2007), a new united currency is underway, starting with gulf states by 2015.
thus will lead to Arab prosperity, thus more democracy, thus better Arab representation of govs.
Israel on the other hand, has two scenarios, will either have an Arab majority by 2020, which will make the Israeli government (that cant be ruled by non-jews) more flexible to accept Palestinian issues, thus making peace easier, or the Orthodox Extermist Jews of Israel, who are becoming more of a majority will increase, and will lead Israel to adopt more extreme politics, which will probably lead to a total war with neighboring Arabs, which they believe that Palestinians must be kicked out of their lands, and go to any other country, while some even go as far as calling for kicking all arabs from Sinai to Iraqi borders.
anyways, regardless of the future expectation, the solutions as i see it is:
*Arab Palestinian State in West Bank and Gaza strip (including E. Jerusalem).
*Jewish Israeli State in the rest of the land or Palestine (including W. Jerusalem).
*Arab, Muslim and African states formalize economic and political relations with Israel.
*Palestinian Refugees who have lived or born in pre-Israel state (pre1948) can go back to their homes, while everyone else who was born outside 1948 palestine can't, yet can freely go their but not get a citizenship.
*Israel must retreat from all lands it occupied, including Sheba'a Farms in Southern Lebanon, and the Golan Heights.
*Israel's Integration in the Arab League, and its acceptance as a Member in the Arab League, (which will assure peace in the region.)