Civil war is a common outcome of binational states, even when the two sides have much better relations than in this case. Israel has not yet had an all out war with Palestinians. There have been battles in Gaza and Jenin, but nothing that has been an all-out, fight for your life civil war, like in the former Yugoslavia or Syria, for a couple of recent examples. Such wars are really horrible affairs for all involved though usually worse for one side than the other.
From the Israeli perspective, a civil war would also involve attacks from other regional players,
“We Iranians as a united and integrated nation see liberation of the Holy Quds (Jerusalem), rescuing the oppressed and defenseless Palestinian nation from the dominance of the fake Zionist regime, and efforts aimed at eliminating the cancerous tumor of Israel as the noble cause of the Islamic Revolution"
In Lebanon alone over 100,000 missiles are ready at all times to fly… at the heart of the Zionist regime,” said General Hossein Salami, deputy chief of the elite Revolutionary Guards, in a speech before Friday prayers at Tehran University.
“Tens of thousands of other missiles… have been planted across the Islamic world and are awaiting orders so that with the push of a button a sinister and dark dot on the political geography of the world disappears forever.”
(http://www.timesofisrael.com/iranian-al-quds-day-resolution-demands-elimination-of-cancerous-israel/)
On the other hand, it is hard to imagine Palestinians faring well in such a war.
Demanding a binational state when there is no readiness for one at all makes such a war more likely. The way such a war would arise would be an escalating series of terrorist incidents and reprisals, and it is not hard to imagine this happening.
Best to try to avoid.
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