The intention was to give background up to the establishment of the state of Israel and the political circumstances, including British and American influence, that brought the formation of the political state into existence. Every conflict since then relates to the existence of the state of Israel.
There is no claim that the Palestinian Arabs have been living in the Levant for 16 centuries. The Palestinian Arabs are the descendants of several groups of people who occupied Palestine beginning with Sassanid rule in the 600's, and including those who resided there during the rule of the Caliphates under the Islamic empire. Jews were dispersed following the Roman expulsion on 70 A.D. and how many actually remained or were residing in the area now known as Israel is disputable. Until Ottoman rule, there were very few.
Yes, there are about 2.2 million Arabic Palestinians living under Israeli rule, many of them make up the majority of the Christian population of Israel, and many of them are Islamic. However, to claim that "they are quite happy living in Israel with the kind of rights found in a liberal democracy and not seen anywhere else in the ME and gulf" is incorrect. There is a lot of racial discrimination in Israel, religious liberty is limited and Arab citizens are not treated equally. One of my best college buddies grew up in Nazareth, his family Christian for centuries, Baptist by affiliation, and being Christian and Arabic in Israel was roughly the equivalent of being black in the South in the US following reconstruction. An "A" student, who got a scholarship at the university we attended, he had been turned down for college in Israel because the allocation for Arab, Christian students had been filled.
And while being offered Israeli citizenship is a choice, for those who prefer to live under the established rule of their own religious leadership, regardless of how "good" it might be for them, that's not our choice to make. Through no fault of their own, the place where their home had been located had been taken over by a foreign power. They have the right to refuse to be part of that, for religious reasons, and not to face persecution or be forcibly moved as a result. They are just as entitled to the land and to their communities.