[O]ne of the few things worse than the Palestinians not getting a state of their own soon would be them getting some kind of emaciated ghost of a state instead, an autonomous polity with a flag and an anthem but shorn of many of the basic rights and prerogatives of states.
The motive for restricting the powers of the new state would be to address the - entirely understandable - fears of Israelis that the new state would only serve as a stepping stone on the road to their destruction. That risk exist certainly exists, but the prevailing situation isn't exactly free of risks. I think that attempts to hobble the new state from the moment of its birth would do nothing to reduce the long term risks to Israel while serving as a perfect excuse for radical Palestinian groups to continue the struggle to destroy Israel.
I agree. McDonagh says (and I also agree) that a few very limited concessions may be reasonable (such as agreeing to an Israeli presence in the Jordan Valley -- a key early warning region for attacks coming from Iran), but by and large restricting Palestinian sovereignty would be disastrous. An independent, functioning military is a source of pride to every nation -- Palestine won't be any different. And if Palestine is to live independently and peacefully with Israel, it will need a strong internal security force capable of fighting radical elements, Islamic and otherwise (several Palestinian terrorist groups are not Islamist at all, like the PFLP). Is it true that a Palestinian army could turn on Israel, or at least shelter rather than suppress its radicals? Yes, of course. But that's no different than the status quo, where the radicals are in essence the army, and there is no chance of checking them at all save by constant Israeli military intervention.