Why is that lunacy?

No.

The only road to peace is the same path that resulted in Germany and Japan becoming close allies. There is no peace with groups who are dedicated to your destruction. You have to completely eliminate those people from the equation.

Completely take over Gaza. Remove anyone and everyone associated with Hamas. And I mean anyone and everyone. The only people who remain are those honest people who just want a normal life for themselves. And you rebuild Gaza and let the honest and decent people, free from the manipulation neighboring Arab states, operate it and establish a running government. Eventually, maybe in 10 years full status nation discussion can happen again, but now? No.

At the same time that is happening, if Iran, or any state shows any evidence of trying to plant terrorist inside Gaza, do what Trump did: bomb the hell out of them. Iran and the neighboring Arab states are a major obstacle to actual peace.