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Well for more than half of Jews living in Yesha a 'settlement' is community or suburb geographically adjacent, and contiguous to incorporated Jerusalem.
About half of all Jewish communities in Yesha are self described as secular or mixed. They comprise about 60-65% of the total Jewish population in Yesha. Secular suburbs sprang up mostly because they were affordable and in the wake of Israel taking in more than a million ex Soviets it was a convenient place to house them. For the remainder, the majority of Israelis live in 8 large population blocs in places like Kiryat Arba. Often labeled "Hebron" Kirat Arba is a new town that was built atop the rolling brown hills of nothing about 15km outside of the actual town of Hebron.
At the end of the day you will probably get your Jew free ethnically cleansed 'Palestine'. It will come at the cost of leaving about 8-9% of the land area inside Yesha which are today in and around Jerusalem and/or abut the green line. For the remainder, the 100,000 or so Jews, you can cheer as they are thrown from their homes and made internal refugees inside Israel like the 9,000 people kicked out of their towns in Gaza in 2005. Much like the 850,000 Jews who were cleansed from Arab countries 1948-54, often at gunpoint, these new refugees will be taken in and resettled.
The Shiny Happy Free Democratic Islamic People's Republic of Palestine will be in effect, cleansed of all its Jews, will declare its independence and then proceed to the next 40 or 50 years of failure, demands and blaming.
Of the thing that the Palestinians are most afraid of is independence. Why? Because on the day that there is a Palestinian state, Arab countries will begin to expel their own Palestinian 'refugees'. They've never given citizenship to Palestinians in Lebanon, Syria, Iraq and many in Jordan. So those states will kick their Palestinians back 'home'. This will add several hundred thousand new immigrants for Hamas and the PLO to manage. Taking people in is never something they've had to deal with, only pushing people out. So this will be a great strain on them. They will discover that having a country is more than having a flag and waving an AK-47 over your head. Someone's got to pick up the trash, run the post office, enter into treaties, bargain trade. Standing up in the UN spending all your time exhorting the world to murder Jews will only feed so many of your people. Eventually you've got to do a bit more than that. Moreover, they will have to actually pay their bills. For instance they get about 80% of the electricity in Gaza from Israel. For which they rarely if ever pay for. For an independent Palestine, not paying your bills is not an option. Likewise they'll have to enter into agreements on water, sewer, pollution, waste management. And they'll have to do it without resorting to terrorism as a tool of foreign policy. Much as we'd all like to blow up the phone company, you can't actually do that w/o suffering the consequences. Even if you're Palestinian.
Now to their benefit, they are today the largest per capita recipients of foreign aid, in the world. It works out to about $1000 for every man woman and child per year. This will continue, probably indefinitely. The UN the EU and US have an interest in keeping that funding stream open even if it's just to maintain them. It's 6 one half dozen the other whether they send money to the Palestinians directly or indirectly. Corruption is a massive problem either way. Before he died Arafat stole about 8 billion dollars never to be seen again. So in the end, independent Palestine takes on the appearance of a not quite functional, not quite failed state; not quite as bad as Somalia or Zimbabwe, not quite as totalitarian fascist as Syria. Something in between. But it will be free of Jews, so there's that.