A two state solution is possible in the context of settlements. If Israel and Palestine can work their issues out with one another, a Jewish state and an Arab state could be created, allowing each nation to have land to call its own. Also, settlements could be divided up so every one has the right land.
No. There has always been tension among countries of different national religion in the middle east. The land itself has always been a highly debated item in terms of settlements, since most of the land is sacred in one form or another. There will always be unrest in the middle east.