Does Israel have the right to exist (and if so, how would you have it act?)

I've wondered about this one for a while. I would love to get into a serious discussion someday with a supporter of the Palestinian cause about this. What do you want all the Jewish Israelis to do? Drop dead on the spot? Pack up and move to Florida? Allow the right of return? Abandon the West Bank/Gaza strip? Provide better compensation to all Palestinians who no longer have their homes?

And if Israel has no right to exist in its current form, why does Canada? The only difference between the two countries is that Canada has far more room and fewer troublesome natives.... the land theft in the two countries differs only by scale.

So why does ANY country have the right to exist? Every country in the world is built on top of the graves of the disposessed.