Israel would give up the West Bank for much more land in the Sinai.

No they wouldn't

Israel would have the potential to become a much more populous and powerful country.

They already have ten percent of their population in West Bank. They're not giving it up.

Egypt would not be taking in Palestinians. Egypt would simply own the land they are in.

That's Egypt taking Palestinians.

Egypt could give them the land.

Yeah, but they won't. And Israel wouldn't recognize it anyway

And it's all still ethnic cleansing.