There was actually a plan for a Palestinian state and a Jewish state, which the Arabs rejected. The UN went ahead without a Palestinian state and created a Jewish state.

What are you talking about with Jerusalem? Since the 1840s, (East and West) Jerusalem has had a Jewish majority, obviously excluding the Jordanian days. It is completely wrong to think of East Jerusalem as being Arab, and West Jerusalem as being Jewish. West Jerusalem didn't exist in the 1840s, it was an expansion later. The only time it was Arab was when Jordan expelled all of the Jews during their control of Jerusalem.

Barak already offered such a plan to Arafat, but Arafat declined. It is very unlikely that Sharon will even think of giving Arafat the same thing, because of his own politics and the fact that very few citizens want it.

The whole point of Israel's establishment is that it was to be a homeland for the Jews. While I disagree with much of the messianic importance that the original secular Zionists placed on the formation of a state, I can't deny the importance of having access to the land of Israel.