Unique in world political development, the European Union is extremely complex: a hybrid combination of historical nation-states and national capitals with European-level institutions located in Brussels and elsewhere.
EU institutions are in part confederal (EU summit meetings in various cities), part federal (the European Court of Justice in Luxembourg, the European Central Bank in Frankfurt) and part strict national sovereignty (major foreign policy decisions, above all decisions for war or peace in Afghanistan, Iraq, Libya).
In the EU, complexity is often a curse but it does provide benefits as well, for example deflecting conflict into ambiguity and permitting the whole to survive even as one part falls into crisis (cf. the current Eurozone debt mess).
The EU is of particular relevance here because, although not wellknown, in international legal terms the entire EU is still a treaty organization (Maastricht) because a proposed constitution for it didn't achieve ratification in 2005.
The Israeli-Palestinian conflict, because it is also unique, requires a particularly imaginative legal and institutional structure.
Why not one state or two states? In the Holy Land a unitary state called Israel-Palestine makes no historical or political sense. A federation called The United States of Israel and Palestine is not much better.
What of a confederation? Normally a confederation means a constitution, weak but nonetheless more than a treaty. Sovereignty rests with the composing states.
(The American Articles of Confederation before 1789 are an example.) But if a Holy Land confederation is based on a treaty rather than a constitution, Israel's national constitution and sovereignty are always superior (as would be true also for a Palestinian state). A treaty in this case would be more durable than a constitution.
A treaty is usually made for a specified period of years and renewed (NATO is an example). A constitution, however, is implicitly permanent.
If the situation on the ground goes sufficiently bad, a treaty can perfectly well be renounced (cf. current concerns about Egyptian repudiation of the peace treaty with Israel.) What would happen in practice as politics in the confederation? For example, there would be no common elections or governments.
Israeli and Palestinian parliaments might meet jointly once or twice a year for a few days, to get to know each other and create common culture more than to legislate. Existing Israeli-Palestinian security cooperation could be given formal legal status in the treaty. Once or twice yearly summit meetings of top national leaders could be mandated along with more frequent councils of ministers in a particular policy area, say agriculture (as in the EU).