Use foreign aid to create a Marshall Plan style boost to the West Bank economy

That's a very big deal. The Zionists, after WW II, behaved as if they had just won WW I. The Nakba was Versailles on steroids.

I think you have the issues exactly right. The Israelis conquered the land they now occupy, and the next logical step should have been to give the dispossessed a more attractive option than revanchism. In that, Israel failed, and the rest is not only history but, sadly, current events.