I am reminded of something written by George Orwell:
"You cannot be objective about an aerial torpedo. And the horror we feel of these things has led to this conclusion: if someone drops a bomb on your mother, go and drop two bombs on his mother. The only apparent alternatives are to smash dwelling houses to powder, blow out human entrails and burn holes in children with thermite, or to be enslaved by people who are more ready to do these things than you are yourself; as yet no one has suggested a practicable way out."
----George Orwell, reviewing Arthur Koestler's Spanish Testament for the magazine Time and Tide, Feb. 5, 1938
The arabs/Palestinians/whatever have had several real, on the up-in-up offers from the Israelis, some of which included no-bull concessions (land, money, authority, etc.) by the state of Israel. The Palestinian response has been variations of, "Eat sh*t and die, mother******." IOW, the Plais have demonstrated they can not live in peace with Israel.
This problem is not an exercise in market economics, where it is possible for both to win or benefit. Someone will control the land & someone will end up wandering elsewhere or dead. The Israelis have the power to decide if they will remain a Jewish state or not. If they do not muster the will, they will end up dead (genocide) or wandering, again (diaspora*).
As to arab/muslim reaction to a possible Palestinian diaspora, only Jordan or Egypt would likely exercise real aggression. The other countries just don't care enough about them to risk an existential confrontation with Israel. If they cared, the Palis would have been settled decades ago or provided assistance orders of magnitude greater then they have received. Other. Arabs. Just. Don't. Care. Enough.
There are no good options, where all can live in peace. In reality, there never were any, but Israel had to try. So much for all those efforts.
* This prospective diaspora would be even nastier than the Roman-instigated one 2000 years ago. The slow movement of news and undeveloped nature of much of the world worked in the Jews favor. After a century and a half of concerted effort to undermine Western Civ and the liberal, modern, accommodationist Christianity by Ashkenazi and secularist/anti-Western gentiles, the moral hollowing out/degradation of Western, liberal civilization is nearly complete. The West's elites are as hostile toward Israel & Jews as they were against the Afrikaners. I would not expect the West (outside of a still partially idealistic USA) to accommodate any such mass of Israeli refugees. Russia, China, and India would also pass. About the best option would be a takeover of some lunatic sub-Saharan country or mass settlement in South America.