Best way would be for the Rabbanim to all work together, replace the Medinah with a restored Malchus of Beis Dovid (perhaps under a Regent), and establish a Jewish state.
To deal with the Arabs, first the Jews in Eretz Yisrael have to realize that the Arabs will never settle for at least the appearance of control. The original agreements made after World War I would have led to a large Islamic state (including all Arabic speaking area east of Suez, with an autonomous Jewish homeland – rather than a Jewish state ruling over the Palestinians. This was sabotaged by the British with the help of the French, Italian and Russian governments – the Brits were afraid they would end with a replacement for the Ottoman Empire, but much more powerful, controlling Suez and access to their empire in India. The only proposal that would win would be a large Islamic state, in which the Jews of Eretz Yisrael would be willing to avoid acting in a manner offensive to Islam (the gays would probably have to move to Europe or America, as would most other seculars) – but that the Jews of Eretz Yisrael would be focused on security and being able to be frum, and not on bossing around the Muslims. The IDF would have to avoid being so threatening to the Muslims, but remember that in the Middle East, every Tom, Dick and Harry has their own militia.