I think the best time would be the 1967 War. That's before Israel was getting insane amounts of aid from the US, still. Also, it's basically all of Israel's neighbors vs. Israel, I don't see how you'll get many more allies than that.
A lot of Jews would flee the country (assuming they were allowed to), but I think a lot would stay, as well. Really the only long-term solution, in my mind, is real democracy and equal rights for everyone in Israel/Palestine, and I think people are eventually going to figure that out -- though, of course, they haven't in OTL, so it could take awhile. I think that given the very high Jewish population, it would be hard for the Arabs to create an analogue of the current situation.