The settlers are on average nuts but Israel, being a democracy with rules on appropriate behaviour have given outright bans to a number of political parties that preach the destruction of the Arabs.
wikipedia said:
1985 Amendments
In 1985, the Knesset approved a law which, for the first time, allowed the committee to disqualify a party list on the grounds of its ideological platform. The law allowed the committee to bar parties from elections that negate the existence of Israel as a Jewish and democratic state, made incitements to racism, or supported the armed struggle of an enemy state or terrorist organization against the state of Israel [2]. The first provision, dealing with the existence of Israel as a Jewish state, has been the most controversial since it is possible that parties favoring a one-state solution could be banned under it.
[edit] 1988 Party Bans
The committee decided to ban the Progressive List for Peace (PLP) and the Kach Party in 1988. The former was banned for allegedly negating the existence of Israel as a Jewish and democratic state; the later party was banned because of incitements to racism. The Supreme Court of Israel sustained the ban against Kach, but overturned the ban on the PLP reasoning that it was impossible to determine that "the real, central and active purpose [of the list] is to bring about the elimination of the State of Israel as the state of the Jewish people." [3].
[edit] 2003 Party Ban Controversy
In 2003, Likud MK Michael Eitan initiated a move to ban the Ta'al Party from participating in that year's Knesset elections. MK Michael Kleiner, the leader of the right-wing Herut Party, initiated a similar move against the Balad Party, arguing that Balad was "a cover-up for illegal activity" and that it "supports terror organizations, identifies with the enemy and acts against Israel as a Jewish and democratic state."[4]
The Central Election Committee proceeded to vote by a one-vote majority to disqualify Balad and Ta'al lists from the elections. Supreme Court Justice Michael Cheshin, who chaired the committee, voted against the ban, stating that there was insufficient evidence to sustain the claims against the parties and individuals within those parties, but also said that Balad's leader Azmi Bishara's past expressions of support of the militant pro-Iranian Hezbollah in Lebanon had angered him. [5].
The bans were appealed to the Israeli Supreme Court, where the Court unanimously overturned the bans on the Ta'al list and party leader Ahmad Tibi. The Court also overturned the ban on Balad and party leader Azmi Bishara by a 7-4 majority [6].
There has been attempted abuse of the law but the only banning the courts have upheld is against the racist Kach party.
Take an actual look at the Israeli political parties.
Kadima (29 seats) supports a Palestinian state and withdrawal from settlements.
Labour (19 seats) opposes military actions against Palestinians and supports 2 states.
Shas (12 seats) is religous but doesn't state a clear view on the Palestinians
Likud (12 seats) traditionally wanted all of "Israel" but have moved from that stance, through the past while.
Beytenu (11 seats) is very "zionist" but supports 2 states
NRP (9 seats) are religous zionists parties opposed to a Palestinian state.
Gil (7 seats) allied with Kadima
UTJ (6 seats) religous parties with no clearly stated view on 2 state.
Meretz-Yachad (5 seats) focused on 2 state soln.
Ra'am-Ta'al (4 seats) Arab party coalition - obviously 2 state
Hadash (3 seats) very left - wants exactly '67 borders
Balad (3 seats) Arab nationalist party.
(source - wikipedia)
According to party policies, the vote for a 2 state solution appears to be:
81 votes clearly for a 2 state solution,
30 unclear votes
9 votes against a Palestinian state.
Isn't democracy grand?
The only reason that the religous or settler parties have importance is the need for coalition governments. If the Knesset members ever put asisde party politics to call this question, the results would be clear. Unfortunately, there is the power struggle between the center and center right parties that gets in the way.