Jerusalem is certainly the capitol of Israel, and should be recognized as such by the world. Israel itself however must change. It cannot survive as a "Jewish state". A homeland for Jews, certainly and a place that can celebrate it's many sacred and historical sites which are important to Jews, Muslims, and Christians alike. But the government needs adopt separation of church and state and recognize Jews, Arabs, and Palestinians as equal citizens.
Before I get branded as anti-Israel let me say that I have always felt a deep connection with Israel. As a Jew I've always felt proud that out of the ashes of WWII a bunch of refugees were able to build such a strong, modern, and thriving society. I was born the same year Israel became a nation, and although I have never been there, have always felt like our lives are intertwined. So please read what I write here with that in mind.
I've never been a fan of the so-called two state solution. That would just leave two tiny nations with limited resources constantly at war with each other. Even if political peace could ever be established there would always be enmity between them. I'm always of the mind that we are stronger together. In the case of Israel, even if you ignore the Palestinians, Jews will eventually become the minority as the Israeli Arab population is growing at a faster rate. A number of people have said that Israel can continue as a Jewish state, or a democracy, but not both. They must also realize that a Jewish state that is not a democracy will not survive. The wonderful spirit that opened its heart and homes to Jews from all over the world would wither and die, and without it the nation would soon perish.
In a way this strongly parallels the situation here in the US. America became great by welcoming downtrodden from Europe and beyond. Once you got here you were "one of us now". We grew and prospered from the hard work and dreams of those who came seeking a better life. Same for Israel. Jew who lost their homes in Europe after WWII, who fled communism in the decades after, and even from exotic places like Ethiopia, flocked to Israel and were welcomed. Together they built a great nation.
Yes Israel has had to remain strong and resolute considering it's neighbors who are committed to it's destruction. But while they are able to defend themselves militarily, they are still loosing the battle for hearts and minds, and are becoming more and more isolated on the world stage. All attempts to make the people more secure are ultimately making them less safe as the Palestinians become more and more desperate. It's time for a change and a new direction.
Israel needs to be born again as a secular democracy, with borders that include both Gaza and the West Bank, with it's capitol in Jerusalem. It must immediately grant full citizenship to all of the Palestinians within these borders, and grant a right of return to Palestinians who have fled to other countries. The reborn nation will need a new constitution that grants equal citizenship to all residents, but includes protections to preserve Israel as a homeland for Jews. These protections must prepare for the near future when Jews are a minority. Jews must always feel secure within their homeland, while at the same time reparations need to be made to the Palestinians who have lost so much over so many years. I believe this can be done. All it really takes is good will. In fact if the governments were to just get out of the way, the people would do this on their own. Jerusalem can yet become the City of Peace, and the capitol of a thriving nation that recognizes the rights of all it's citizens to live, love, worship, honor their traditions, and celebrate their unique history and vast contributions to the rest of the world.