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>Hamas intentionally targets civilians and does not recognize Israel. It should reverse both those.
Hamas doesn't just "not recognize" Israel, they do not believe that it presently exists, nor that it will ever exist in the future. They don't believe there's anything to recognize in Palestine except Palestine. This point of view cannot be changed without their total extermination. Furthermore they do not recognize non-Hamas as civilians nor non-Muslims as humans: they are targeting dogs, not people. This strategy also cannot be changed without their total extermination.
>Israel keeps supporting illegal settlements and building new ones, and taking over strategic resources in the West Bank (water). They should stop doing that.
Israel is a big dumb fucking troll and they don't give a fuck how many people get shit on because of their retarded fucking nonsense. Furthermore, they see it as their right to settle anywhere they damn please, inside or outside of their country, for any reason they wish, and fuck anyone who says otherwise because they have the US in their pocket and God on their side. This point of view cannot be changed without their total extermination.
>Palestine becomes an independent state, Israel keeps a military presence. Both form an economic zone.
Palestine is an independent state. Palestine is the country that was reformed after WWII and administered by the British until their withdraw. Israel is the rebel stat that needs independence, according to historical fact. However, the international community has managed to turn this frown upside down, along with history, in order to support further escalation of the conflict. Neither party is interested in an economic zone; only the annihilation of their opposition. This problem cannot be solved with out the total extermination of both Israel and Palestine, or the total extermination of all first world nations.
tl;dr - The solution is simple: Kill every living person in Israel and Palestine or cut off all international support and let them do it themselves.