They stay right where they are. They may need to pay reparations to Palestinians they displaced however, and any laws restricting land ownership or buying and selling to Jews should be abolished.
Who is the government? Is it an elected body? Who elects them?
Because either you appoint a government that is made from basically Hamas (that'll be peaceful!), or you open elections for a new country where Jewish people are 73% of the population... so basically Israel again but now with officially more territory.
Universal suffrage and equal rights for everyone from the river to the sea. That, as a basic universal principle that any reasonable person wherever in the world can assert as the basic requirement for democracy. If you don't like that, you're against democracy, and I don't know if anything else can be discussed.
I never said I was against that. I'm just trying to figure out the much harder act of implementing that very simple view of the world. If you just say, "here's a new country that's fully democratic with equal rights for all... but it now includes both Gaza and West Bank and is 73% Jewish," you have effectively given Israel an even larger country. Hell, in the US we have universal suffrage and equal rights for everyone from the ocean to the ocean... but only theoretically. Ask a black man how equal he feels in the US, even though he has all the rights and suffrage of a white man. That's how Palestinians would be treated except probably way worse.
The details beyond that are what is actually difficult and why peace hasn't been achieved. It's all fine and good to say, "we should all be happy brothers" but it ignores how hard that is to do when the two brothers want each other dead. I'm in favor of a two state solution along with reparations, but that will also be very difficult to achieve, as evidenced by the many times it has been attempted over the decades.
Your math doesn't really check out. Israel has 9 million people 2 million of which are Arabs, and Palestine is 5 million. A binational state would be about 50-50 Arab and Jewish.
Also, you're misrepresenting the difference between the current apartheid state present in Israel/Palestine and the American problem of racism. One has different rules, different courts, different rights, and different protections there is no universal standard. The other often fails to live up to its universal standard. The latter can be improved, the former cannot.
Ultimately, getting lost in the weeds and the details has been an israeli tactic for maintaining the status quo for 50 years. The way you're nickel and diming the details of what would happen after freedom is like asking Lincoln to produce a full account of systemic racism as a precondition to the Emancipation Proclamation. No! I don't care what the details are and I don't need to care, and I refuse to be bogged down with shitty minutiae while injustice reigns. The current system is unacceptable and must be dismantled in favour of universal democratic human rights. Let the people be free and let them decide. Prolonging an insufferable situation just because you don't know every little detail about what freedom might look like is despicable, slavish and cowardly.
You're right, I misread the number of people in the West Bank.
Israel has 10 million people, 7.3 million of which are Jewish. West Bank has 2.7 million, 670,000 of which are Jewish. Gaza has 2.3 million, roughly zero of which are Jewish. So 8 million vs 7 million.
But calling me cowardly because I'm trying to figure out a much more difficult situation than "just do it" is terrible. You have to realize it is much more difficult than just saying, "create a new government." You are trying to do what George W Bush did in Iraq. Just get rid of the old government and start a new one. It's that easy! Just do it! If you half-ass the implementation of the solution, you're going to get a horrible outcome. These details need to be discussed if you want to get to your desired solution.