Transjordan was created by the British to keep the Hashemites in power somewhere after the Saudis drove them out of Mecca. It's as artificial as Saudi Arabia. Before its founding as a monarchy it was part of the British territory "Palestine (Land of Israel)" and before that it was part of one or two Turkish provinces.
Palestine as a territory is older, two years older.
However, there is lots of local Arab Palestinian support for a federation with Jordan under the monarchy:
70 prominent Palestinian professors, business leaders, and members of the legislative councils were invited last month to attend a meeting at the port of Aqaba, Jordan. The meeting was initiated by Ex-prime minister Dr. Majali; the main man behind the Israeli-Jordanian peace treaty, to discuss the dead peace process in the region and the future political relationship between the upcoming Palestinian state and the Hashemite Kingdom of Jordan. The timing of this invitation was very interesting since it was almost 40 years ago that the West Bank and East Jerusalem, fell out of Jordanian hands into Israeli control in the course of the Six-Day War. Surprisingly the idea of a potential confederation between the West Bank and Jordan surfaced again when many members of the Palestinian delegation raised it with the King.
http://gnblog.com/?p=226
Such a federation including Israel would also finish the project the Hashemites and Zionists started in 1919, before the unfortunate interruption due to (non-monarchical) Arab fascism:
The Arabs, especially the educated among us, look with the deepest sympathy on the Zionist movement. Our deputation here in Paris is fully acquainted with the proposals submitted yesterday by the Zionist Organization to the Peace Conference, and we regard them as moderate and proper."
http://en.wikipedia.org/wiki/Faisal%E2%80%93Weizmann_Agreement
If we go back to that point, we can forget the entire sad history and all the wars fought between Israel and Arabs will have changed nothing except guarantee the survival of the Jews. All border disputes would be erased, Jewish settlers would be legitimised, Arab claims to property in Israel could be handled according to Turkish/British/Israeli/Jordanian law as required, and everyone would have a proud way out.
The federation of Israel and Transjordan would consist of two countries (Israel and Transjordan) and five nationalities (Jewish, Arab, Armenian, Circassian, and Druze). Apart from the two titular nationalities all nationalities can choose for themselves which country they will be citizens of (Israel, Transjordan, or depending on location). This will guarantee a special privilege for minority groups (they can decide where to vote on an individual basis, details will have to be worked out).
There could be a process for further countries to join, which would include the following requirements:
1. At least one of the candidate country's official languages must be Hebrew or Arabic.
2. The candidate country must accept the Hashemite King as its head of state.
3. The candidate country must guarantee freedom of religion.
4. The candidate country must border an existing member country or a country bordering an existing member country.
5. The candidate country must have a historical connection to Islam or Judaism.
For example, Iraqi Kurdistan could join if it keeps Arabic as an official language and accepts the King as nominal head of state. Iraqi Kurdistan already guarantees freedom of religion, has an acceptable location, and has a historical connection to both Islam and Judaism.
The Arabic language will serve as a connecting language for diplomacy and trade. (Hebrew is mentioned so that Israel itself can join.) Other local languages spoken by the many non-Arab peoples will be elevated to regional official languages as long as each member country itself agrees to use Arabic for diplomatic purposes. Arabic will also be taught at schools.
The pagan name "Palestine" would vanish with the founding of the federation.
Each country will be represented in Amman by a special ambassador-senator and each nationality will also be represented by a senator. So in the beginning the senate advising the King on federal matters will consist of two ambassador-senators and five nationality-senators. All normal matters of state including treaties within the federation will be handled by each country's own parliament or government.
Note that if Lebanon should join, the Maronites will be free to decide whether they are Arabs or Phoenicians, and the Druze of Lebanon will become part of the Druze nationality. They will remain Lebanese citizens. The Lebanese currently living in Israel will also remain Lebanese citizens (not Transjordanian citizens).