My guess is that the status quo will continue for a few dozen years in which Palestine and Israel will slowly integrate economically. Then Palestine will ask for integration with Israel and Israel will accept, for lack of better options.
Settlement building will continue, and negotiations between the burgeoning Palestinian state and Israel will center around trading legitimacy of the settlements for easing of security restrictions keeping Palestinian economic activity from flourishing. This is, of course, contingent on the ability of the Palestinians to curb terrorist activity.
After enough of this the borders between the two states will be so convoluted that the only real solution is political integration.