DovBear over at "the only blog you'll ever need" argued today that Israel has turned the territories into Birmingham, Alabama circa 1955. The settlers are doing teshuva (repentance) for decades of unjustness against the Palestinians.
Does Israel compare to the South of Martin Luther King Jr.? Of course not. Israel took control of these territories through an uninvited war. The population was, and still is, hostile. Should Israel have just granted them political and social rights on par with Israeli citizens? Of course not. No country would grant a hostile population control over its political infrastructure vis-a-vis elections. No country would give them unlimited access through its borders. And no country would allow the hostile population to live in close proximity with its citizens. A war is a war, and countries have to take basic measures to protect its citizens.
Moreover, Israel has done much more than required. Palestinians have access to Israel's civilian court system, something not required by international law. Israel has built roads (bypass roads were a product of Oslo and did not exist before 1990), hospitals and universities. Before 1967, there was not a single four year university in the territories. Now there are at least four. The reality is that Israel has increased the standard of living over that which the Palestinians enjoyed under Jordanian and certainly Egyptian rule.
I'm not going to pretend the Palestinians have it great. But they were part of a war that Israel had to fight. They still refuse to make peace under reasonable conditions. Israel has no choice but to consider them the enemy and treat them as such.