Originally Israel was drawn up to include trans-Jordan. The British broke it up so that the Arabs got the larger half (the original 2-state solution). Jordan then expelled any Jews living there, as did several other Arab countries. Israel made the mistake of letting the Arabs stay in or return to their land at that time and several times afterward. If they had started with a clean slate, they could then welcome back any Arabs that wanted to live there as Israeli citizens.
I agree with part but disagree that the Arabs should have been expelled from Israel.
I just want to re-iterate the historical land division.
With the Balfour agreement, Israel was to receive land which at that time was owned by Britain. During WW2, England negotiated with both the Arabs and the Jewish people to gain favors in fighting the war. The piece of land included modern day Jordan and Israel. After the war, England had promised the land to both groups but in negotiations broke it up with what was then called Trans-Jordan being the bigger piece and Israel smaller but with access to the sea.
During the 'U.N.' negotiations for the land division, and interesting thing occurred. The entire land was referred to by England as Palestine. The Jewish people living there called themselves Palestinian Jews (much like Jewish people living in France call themselves French Jews). The Arabs were arguing against the Jewish people receiving any of the land, and their argument was that there was no such thing as Palestinians so there were no 'Palestinian Jews'. Times certainly do change.
Anyway, the Arabs and Jews living in the land, Jordan was given to the Arabs (Trans-Jordan) first, and later the Jewish people received Israel. The Jewish people were pressured to move out of Trans-Jordan. The Arabs encouraged all Arabic people to move out of Israel, as they planned an immediate attack. They promised the people that if they moved out, to clear the way, they would get all of the land when the Arabs were victorious, so many Arabs did move out of Israel. Some stayed. When the war was lost, Arafat, who lived in the Arab section, Trans-Jordan, continually pressured Jordan to declare war against Israel. He protested. The King of Jordan offered to share rulership with Arafat, but Arafat refused and continued making trouble. Jordan assisted Arafat to move to the west back later, to get rid of all of the headaches and trouble.
So, in reality, the so-called Palestinians did receive land already.
Now for the other issue.
In History, the Jewish people were forced out of their homes in various countries. They sometimes were forced to move with very little notification and often as winter approached, so many died traveling looking for a new place to live. With this fresh in the Jewish minds, the last thing the Jewish people want to do is to be the ones who force others out of their homes, claiming the home and land and leaving other destitute. So, any Arab who wanted to remain in the land, was not forced out but allowed to stay in their homes. This was the only right thing to do.