This is part of the false dichotomy that underlies most of the discussion. I doubt there are any moderate people who are asking Israel to "lay down its arms". There are variations on this I see presented in online arguments all the time, with words like "If Israel sat idly by..." and such.
I don't disagree. It does create a false dichotomy. As Rhea points out the Jewish settlements on the West Bank are a problem, and many Jews believe that the West Bank should be rid of Palestinians. So it's hardly clear that there would be peace, other than a peace of conquest. Hardly acceptable.
But is there a difference between the aims of Israel and the aims of Hamas? Perhaps I misunderstand, but if I have been led to believe that for the most part Israel has no objection to the establishment of a Palestinian state in Gaza and the West Bank. The leadership at least supports these in principal. But the leadership of the Palestinians does not support the continued existence of Israel as a state.
Israel has specifically blocked moves by the Palestinians to form a legal state, even one without clearly defined borders. The most recent attempt was to gain recognition as a state via applying for UN observer status. Israel blocked the move.
Israel has formally agreed to seek a two-state solution. So has the Palestinian President. Various political groups within Palestine and Israel have also proposed or supported this, including Hamas. Extremists on both sides have opposed it. However, there are caveats on both sides.
Israel does not want an armed Palestinian state, with sovereignty over it's own land, or control over its own borders, and has never offered this as part of an agreement. It wants to reserve the right to assassinate people in Palestine at will. It also does not want to give up all of the existing settlements, or the existing military bases scattered throughout Palestinian territory. And it rejects outright the internationally agreed 1967 border as the starting point for negotiations. It wants to include all of Jerusalem, and many of the larger settlements, as being in its own territory. None of this is just a matter of leadership, it's also a matter of what any Israeli leader could get support for.
Similarly, Palestine has offered to recognise Israel as a state, but not as a Jewish state. It wants a recognition of the rights of Palestinians to return to their homes in Israel, to be settled by cash payment rather than actual returnees. And it's not willing to accept anything less than the full statehood that Israel has.
There are, of course, a lot of politically influential extremists on both sides who want to destroy the other. The Palestinian ones want to destroy Israel entirely, and the Israeli ones want to ethnically cleanse Gaza and the West Bank, to claim a Greater Israel. Hamas more so that Fatah has the support of a great many militants, while the ruling coalition in Israel is made up partly of settler groups who talk about a 'Greater Israel' from the jordan to the Sea (I.e. including all of what is proposed as Palestine).
I hear a lot of criticisms on this board of Israel, as well as from a lot of others on the left. I can't disagree with a lot of it, but I don't know the actual solution.
Well I see three possible end-states.
A single state solution would end up with one state covering all of Israel and Palestine. This doesn't really suit anyone except the extremists, since the state would no longer be Jewish in any useful sense. However, it is presently where the settlement program is taking us - if Israel takes the land, and can't get rid of the a Palestinians, then it either loses its distinctive identity, or will no longer be democratic (because it will contain too many non-Jewish Palestinians).
The single state alternative is to somehow kill or cleanse enough of the Palestinians from the region to end up with a Jewish majority. There have been some signs of that strategy from Israel, with measures such as allowing Palestinians to leave the area, but then deny them the right to return, and attempts to arbitrarily restrict goods or otherwise frustrate or obstruct the inhabitants from developing economically. But in general, the measures that are needed for this to be effective go beyond what Israel is willing to do.
So rejecting a single state leaves us with a two state solution. Israel withdraws all the settlements back to the 1967 line, with some lands swaps to include the largest settlements in Israel and to make a more sensible border, stops or pays Palestine to continue the extraction of water or mineral from their territory, and the right to Return gets settled by token payments from Israel to Palestine that are then heavily subsidised by the states of the Arab League, and you end up with two states living side by side who really, really, really don't like each other. In practice the border should be monitored by a neutral force, potentially for decades to come.
The last seems to be the most viable solution, is emerging as a clear consensus from all the various peace proposals from each side, and is loosely based on suggestions made over the last decade. However, it would require Israel to let their enemy build a viable state with a proper military, and dismantle the settlements. Not surprisingly, they aren't keen.
The point is that we already know what the peace would look like, we already know what's necessary to accomplish it in practice, but on Israel's side there isn't the political will to do it. Hence why there is so much criticism of Israel, both here on the boards and increasingly around the world. They're in the driving seat, only they can do what's necessary, and they don't want to do it.