While I somewhat agree with your take on it, you know the reason for the division and the two separate areas.
The strife was too pronounced to continue to live amongst each other.
They tried to split the two factions hoping they could find peace in their own area.
That might be the official narrative. But behind the scenes, a faction within the British Foreign Office and military, known as the Cairo-Khartoum Kabal, began instigating violence against Jews while busily disbanding the Jewish League and their makeshift police force. In 1920, they blocked the entrances to the Old City while a pogrom went on full force. Zeev Jabotinsky was arrested and sentenced to 10 years when he tried to enter with a group of friends to defend the Jews of the Old City. This was just the beginning. One of the main instigators, Haj Amin ElHusseini, was first pardoned and then appointed Mufti of Jerusalem, despite the express results of an election that heavily favored a Khalidi (rival faction to the Husseinis).
Without getting into further detail, the hostility of Arabs was ginned up by the Cairo-Khartoum kabal, a group of pan-arabists that included the famous Lawrence of Arabia, General Allenby, and even Governor Lord Samuels, a Jewish peer, as well as the notorious Grand Mufti, Haj Amin ElHusseini.
Furthermore, Jews and Arabs are not and should not be separated into two separate areas. 20% of Israeli citizens are Muslims, living in urban and rural areas of Israel on the other side of the Green Line. And Jews began living again here in Judah and Samaria soon after the Six-day War. That’s as it should be, and as it always has been. We may not always get along peaceably, but we’ve always been neighbors and cousins, even in the worst of times. That’s as it always has been, long before Mad Mo came along, the exception being Jews who’ve lived for generations in Europe where there are no Arabs, who are not the majority within Israel. As one of the “Europeans,” I personally attest that I don’t really mind, despite the dangers. Attempts to separate us are misguided, though understandable.