2 state solution with 1967 borders with land swaps. A divided Jerusalem would be the capital of both countries, divided on ethnic/religious lines. The Palestinians would have no military, along the lines of Japan after World War II. The borders of the new Palestine would be manned by an international force, probably a UN force possibly one of a third party (I think the British were mentioned at one point). As for the right of return, a small number of refugees will be allowed to return, the rest will be compensated with money. This money should be in part provided by Israel and in part by the international community. We in America should provide a big chunk of it, as peace in the middle east would be worth the cost.
This, though I would include the Arab League (as the mentioned third party) along with the United Nations in policing the borders of Palestine.
