You know this is a complicated question that causes reasonable people that agree on almost everything else to just about get physical acting out.
Consider this - you make peace with your enemies, not your friends.
First - When is the starting point? 1948? 1929? 500AD? Some other date? valid arguements can be made for each.
Second - The Realpolitik of the situation. Israel isn't going to just go "poof" and disappear. (Sorry to those who wish it would). Neither will the Arabs that refer to themselves as Palestinians. (Sorry to those who wish they would).
Third - Iran is backing multiple groups to cause unrest and destablize the region. One of the goals to limit and reverse other Arab countries normalizing relations with Israel. ** This point tends to get overlooked in many conversations. **
What likely has to happen to keep it viable? Eliminating third parties with anti-Israel agendas from the process. For example: Hamas, Hezbollah, even some of the NGOs.
Why is a two state solution viable? Because long-term, there is no other solution for peace that provides for all parties to exist.
A two state solution will provide a clear path to:
- The settlements (in the westbank), because it whose land it is will no longer be fluid. To clarify - then there won't be likely to have settlements or at least people making arguments that they are legal in some cases.
- Provide a method for economic growth for the Palestinians. This is a major point. Currently multiple generations have lived in poverty or close to it.
- Provide a path to normal relations with Israel.
The list can go on.
Breaking the grip of anti-Israel radicals is likely before a two state solution is viable. The stated reasons from the pundits are to not reward Hamas.
As a note to some of the comments, referring to both sides "are shit to some extent" really misses the point that majority of people - 99.999% of people want to live in peace. And - this is important - don't implicitly hate people that arent the same as them.