Israel's Strategic Thinking
For some time, the right wing has been warning that if Israel is to deal with the "demographic problem" -- too many non-Jews in a Jewish state -- it is either going to have to expel the Arab population, which is regarded as unfeasible (except insofar as conditions will be made so miserable that those who are able to do will leave), or to draw boundaries in a way that guarantee a Jewish majority for some time to come while retaining effective control over the occupied territories.
That's the basic reasoning behind the wall in the West Bank, the infrastructure programs, etc. Much of the initiative has been coming from the right, some of whom have also advocated forcefully transferring parts of Israel with heavy Palestinian population to the cantons that will constitute an eventual "Palestinian state," under the programs that Israeli sociologist Baruch Kimmerling calls "politicide."
On the land swaps, it depends what they are. The proposals at the Taba conference called off by Barak (Jan 2001) were approaching something reasonable. Those of later proposals, such as the Geneva accords, more so. To find out what is currently being planned I suggest that you look at a long discussion by Harvey Morris in the London Financial Times, Jan. 4, which includes a proposed map of land swaps. Lots of complex proposals of swapping among states, which offer nothing but jokes to the Palestinians. But the most striking feature is that nothing -- precisely nothing -- is to be given to Palestinians by Israel. They can hope to get away with that as long as the US government (media, etc.) go along, either with silence or deceit, and I suppose it's taken for granted that Blair will meekly follow the master, and that Europe won't tread on his toes.