Something struck me today, the situation in Israel is similar in many ways to that of the former 'White Dominions' of Australia, New Zealand, Canada, South Africa and the United States. These countries saw a large scale influx of settlers from the 'home' country, who displaced the native inhabitants. The difference with Israel being that since those countries were much larger there was more space available, which probably made cohabitation easier.
While researching these thoughts I came across a couple of articles that articulate these ideas far better than I could, you can access the links below to read them in full.
One which argues the case for the colonial parallel:
And a slightly different view, from a liberal Jewish perspective. It admits the basic case but highlights some differences from the other colonies. Some good comments in the 'comments' section of this piece as well.
Related posts:
As the Arabs see the Jews
Israel's democratic credentials