The forgotten refugees
This is part 1 of a documentary (with the remaining parts also available on YouTube) dealing with a seldom discussed problem, the expulsion of Jews from various parts of the Middle East and North Africa in the 20th century. More details available elsewhere - most of mine are in book form so I'll just point you to two articles on Wikipedia as a starting point.
There's a lot you can criticize Israel for. That includes past involvement with terrorism, religious discrimination, and certain aspects of how the country treats it's Arab citizens (look, for example, at the education funding per student for Arabs versus Jewish schools). In the same category I'd toss the recent moves the state of Israel has made towards requiring a loyalty oath towards Israel as a "Jewish state" and the recent resumption of settlement building in the West Bank.
Still, those states around it seem at best to be no better. Israel's got a lot more freedom of the press (the loyalty oath article above is from a Jewish newspaper and refers to protests on Israeli soil for example). Similarly, although there's some incidents in which they lack transparency, a editor at a leading Palestinian news agency had the following to say:
I find it preposterous that there's transparency when the IDF [Israeli Defense Force] arrests Palestinians but not from the PA [Palestinian Authority] when they arrest their own people. (Source: FP)
The Corruption Perceptions Index ranks Israel as significantly less corrupt than the countries surrounding it. In addition, Arab Israelis may have more rights. As one observer notes: "Israel is one of the few countries in the Middle East where Arab women can vote. In contrast to the non-Israeli Arab world, Arab women in Israel enjoy the same status as men." While some discrimination against Arabs seems to exist in Israel, the same applies in the West Bank and Gaza Strip.
All in all, I can't say that I'm expecting any sort of quick and easy solution to this problem anytime in the near future.