The Israeli government offered almost all the territory back about a month after the war (started by the Arabs to throw the Jews into the sea)in 1967. The Arabs responded with the famous 3 no's of Khartoum. The fact is that there was no one to negotiate with in the 1970's and 1980's. The PLO was crowned by the Arabs as the representative and the PLO did not recognize the right of Israel to exist. When Egypt sat down to talk they got back every inch of territory in 1978.
It is hard to deny the Jews historic connection to the land. See [link|http://z.iwethey.org/forums/render/content/show?contentid=151574| here ] for a humorous take on this. Jews have lived in Judea (the West Bank) uninterrupted for thousands of years. For a Jewish government to deny Jews to live in their holiest cities would be criminal. This is how the "settlements" started.
The bottom line is that time doesn't stand still. If the Arabs had accepted the UN partition plan they would have had a state in 1948. If they would have accepted Israel's offere in 1967 they would have had all the territory. They didn't and now the facts on the ground have changed.
There are 22 Arab countries comprising 99% of all the land in the Middle East. Is it too much to give the Jews 1% of the land? As I stated population transfers have occurred in many places. During wars that is what happens. The Arabs started teh war and reaped the consequences. Here also, over 800,000 Jews fled Arab countries to Israel from 1948-1953.