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Your logic is flawed.
See, I was wondering about where you heard that whole, "Everything in the territories belongs to Palestine according to international law" also, so I wanted to see how you would respond to shira's question. But it turns out you're making a lot of assumptions that aren't based on solid ground.
Let's assume that what you're saying about the settlements is accurate... that they're all illegal and Israel has no right to build any of them. You're looking at that, (which is itself a debatable statement) and extrapolating from it that everything then must belong to the Palestinians by law as well. Which is really ridiculous. Just because Israel does not have the right to unilaterally annex the OPT does not mean that it automatically belongs to someone else.
There has never been any Palestinian state. Legally speaking, none of the land at all is considered to be Palestinian territory. It can't be. There is no such thing as sovereign Palestinian territory and there never has been yet. Also consider the fact that 20 years ago the land in question was claimed by Jordan, (and not by the Palestinians.) The idea of that land being used for a Palestinian state is relatively recent. In fact, up until 20 years ago all of the Arabs living there were Jordanian citizens. When the land was under Jordanian occupation no one was arguing that actually belonged to Palestine.
The fact of the matter is that a lot of the land in question is disputed. Both Israel and Palestine claim it. And they have to work it out. There is certainly no law that states that the green line defines the border between Israel and Palestine. Because Palestine does not exist yet. There is an agreement that very clearly states that the green line is not, and is not to ever be considered a border, which was signed by Israel, Jordan, Egypt, etc. So I don't know what you're talking about with that one.
Consider an area like the Jewish Quarter in Jerusalem. Jerusalem was a Jewish majority city at the time of the war in 48 and for the previous 100 years or so. The Jewish Quarter had been Jewish for much longer than that though. But the UN Plan proposed that Jerusalem remain under UN jurisdiction. During the 48 war Jordan ethnically cleansed the territory they captured, expelling all of the Jews. Palestinians (with Jordanian citizenship) moved into the area following the war. (Incidentally, wouldn't that make them illegal settlers by your definition?) 20 years later Israel took control of East Jerusalem while fighting a war of self-defense. (Remember that Jordan attacked Israel in 67.) Jews return to the area. Now, you're trying to tell me that international law has guaranteed this parcel of land exclusively to Palestine? Based upon what? No treaty ever granted the area to them. None of the post 67 UN security council language even uses the word "Palestine" much less guarantees it anything. Yet you think that a law exists which places all of East Jerusalem under the sovereignty of an Arab state which does not yet, and has never, existed.
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