Israel is valuable as a refuge because it gives Jews around the world a place to go if, as in Russia most recently, they are oppressed for their ethnic heritage. This options is valuable even if Israel's current Jewish citizens are at higher risk than they would be now in the US, Europe, Russia or Argentina.
With the world community still unwilling to intervene to stop genocide or lesser ethnic oppression, and with anti-Semitism on the rise in Western Europe, Jews are unlikely to agree to re-design Israel as a secular state that will eventually house a minority Jewish population.
This is understandable, and still tragic. To support Israel the US has to, in effect, continue to support ethnocentric policies that we spent hundreds of years, and hundreds of thousands of lives, to overcome in our own country. It forces us to be hypocrites, undermining our credibility, the credibility of the United Nations and our relationships with more than just the Gulf states.
We need to ask not whether a certain peace plan will work, or who is right or wrong with the latest attack, but how we can support a state whose values and behaviors conflict so strongly with our principals and strategic interests. It would be nice to find a solution that would let the people there (forget history for a moment - they're there now) preserve a safe state and let us live up to our own principles. But I suspect that such a search will return a null set. Which doesn't mean that the West should withdraw all support, but does mean that future aid should be contingent on Israel pulling back fully to its '67 borders.