The conflict would probably be still long lasting, but simpler. No settlers, no disputed status of Jerusalem, no partially-empowered Palestinian Authority. Just Israel, a PLO based outside of Israeli borders, and Arab neighbors that want to initially invade them but may, like OTL Jordan and Egypt, be pragmatic.
As others have mentioned, the diaspora will be an issue. With a much larger number leaving, at an earlier time, will a Black September type attempt to take control of Jordan happen earlier, and possibly be successful? If it fails, Syria and Lebanon would likely see an earlier and larger wave of refugees than they did in the OTL 70's, which exacerbated Lebanese tensions in the lead up to their civil war and won't exactly be a stabilizing force 30 years earlier.
IOTL, I still see a second attempt to invade happening. Israel's borders are much more defensible now, but the temptation to believe several countries vs one will be a winnable war will, I believe, still lead to another conflict. It probably will not lead to such a severe territorial dispute as the current West Bank and Gaza, but Israel might still try for somewhere defensible, like the Golan/Sinai as OTL (if Syria and Egypt invade) or the Jordan River Valley if a Palestinian-run Jordan is leading the charge.