I can openly admit that I view the current situation in the Israel-Palestinian conflict as a sad and tragic outcome for everyone involved. Seeking alternatives to deadlocked territorial disputes is something I like to explore and ponder for family reasons. And I'm opposed on practically all territorial claims based on history, since they never bring any good to anyone and only lead to spiralling cycles of violence.
The continous existence of Jewish population in Palestine is a remarkable tale of cultural continuity. But the presense of a single group in a territory where they once were a majority at a given point in history is definitively not a valid reason to claim it on the grounds that "we were here first." Using history for political purposes like that is always dangerous and bloody business, no matter which ethnic or religious group does that.
I'm myself descended from refugees whose old homeland was forcibly colonized by a Soviet population transfer after WW2, and I think that I have no real right to say to people who have lived in the former lands of my ancestors for three generations by now that they should leave their homes. Same goes for rest of the world - Serbs had no right to treat Kosovo Albanians like "overbreeding defilers of Old Serbia and Kosovo-Metohija", Poles had no right to expell Ukrainians in late 1940s and so forth. Why should there be exceptions to this rule?*
*Note that I still think that after OTL horrors of WW2 the Jewish population simply had to find a place of their own somewere from the world - but I still think that Palestine was not the optimal spot for that.
Sinai would have definitively been a poor option, but personally I consider the Somaliland scenario as an option that avoids the usual "Let's just settle them to Alaska"-styled solutions that are obviously suboptimal to the interests of the Jewish community. In fact I've chosen it after carefully considering all the potential options, seeking a spot that would be close enough to have cultural history and connections to the Holy Land while still being less politically controversial area for settlement.
I personally find it really hard to believe that British Somaliland would turn into a "Israel in Africa" with Jewish majority. But it would still have some kind of impact, and hence this thread.
I pretty much have to agree with you; the unfortunate fact is that not everyone's aspirations can be accommodated, given the history of conquest and expulsion in OTL. To return one group to an historical homeland would mean expelling someone else, whose great-grandfathers may have been conquering ethnically-cleansing jerks, but who themselves are just people trying to make a living on the land they inherited.
I don't have to like it all, though. Although there is no good solution, I don't easily accept one that ratifies a previous expulsion. If we accept that a group has a right to land because of a previous occupation/expulsion, that encourages others to try; after all, if they can just make it stick for a generation or two, then they have a "right" to the land. Where does that end? I'd prefer not to see a Fifteenth Balkan War, or whatever.
Either way just leads to the spiraling cycle of violence you mentioned. The cure just begets the illness; examples of historical success breed more attempts. Israelis kicking Palestinian Arabs out of the West Bank cannot be said to be more evil than the Arab Conquest of same.
Anyway, enough philosophizing.
Somaliland is probably the least bad of a set of bad options, but I don't see it leading to a Jewish state, since without the "ancestral homeland" draw, it just won't be compelling enough. If the Jews must have a State after WW2, Palestine seems the only plausible option.
The best bet would be to find a way to smooth it so that the Palestinian Arabs accept the idea of Jewish sharing in the political process of a new nation, so that Jews don't feel the need for defensible borders, and Arabs don't feel the need to flee their homes following the failed ethnic cleansing attempt of 1948; in theory this could result in a State that embraces both the Jewish immigrants and the Palestinian Arabs already living there. But for that sort of teamwork to be accepted, I fear, we'd need a POD in the 7th Century...