Very interesting theory about nuclear war, Universal Mind. Its almost biblical, if you know the Armageddon story according to Revelations.

As to your question why the Muslims want that piece of land, hate. I don't believe the land holds any real value to them. They just hate the Jews.

As to your co-existence proposal, I'm not too sure. I mean Shi'as and Sunni Muslims kill eachother, so I'm not too sure Arabs and Jews could live nextdoor to eachother. The conflict between the two has been ongoing for over a millenium and a half. Healing that relationship just doesn't seem plausible.