When Muslims [Holy Prophet Muhammad (SAW) including] migrated to Medina, they signed a treaty with Christians and Jews residing there. Unfortunately those Christians and Jews saw Muslims as a threat to there culture and decided to backstab. However, these experiences did not discourage Holy Prophet Muhammad (SAW) to establish/maintain diplomatic relations with Christians and Jews residing in other regions.
Example 1:
The Abyssinian King (Negus) and The First Immigrants
When the Messenger of God began to declare his message openly, the Makkan pagans started to severely oppose him and the new Muslims, making many problems for them. Several Muslims died, with even more being humiliated and alienated. The Prophet realized that Makka was becoming a difficult place for Muslims to live in. He had his uncle as his protector; but there were many Muslims who had no protection from the aggressions of the Makkan pagans. He decided to send some of them to Abyssinia, especially those who had no effective protection; Abyssinia at the time was ruled by a Christian ruler. The Prophet told the group that King (Negus) of Abyssinia was a Christian, so they would be safe there. It is likely that Prophet Muhammad had some knowledge that the King was a peaceful and lenient ruler.
At the outset, eleven Muslims immigrated to Abyssinia. Later, they were joined by about 83 adult Muslims, women and men. Abyssinia was the Prophet’s choice; he felt that Christians were closer to Muslims than the Makkan pagans. When the first Muslim guests arrived there, they met with the King. Ja’far, as leader of the immigrants, gave the Prophet’s letter to the King, which read: “I have sent my cousin Ja’far to you, accompanied by a small number of Muslims; if he comes to you, receive them in hospitality . . .” The King welcomed them and promised to protect them from their enemies. In the royal presence a question was put to them: “What do you say concerning Jesus?” The spokesman for the group replied, “concerning Jesus we can only say what our Prophet has taught us: Jesus is the servant and messenger of God, the spirit and word of God, whom God entrusted to the Virgin Mary.” When the King Negus heard this testimony, he picked up a twig from the ground and said, “I swear, the difference between what we believe about Jesus, the Son of Mary, and what you have said is not greater than the width of this twig.”
When the Makkans heard that the Muslims had begun to live within the Christian community peacefully, they sent a delegation of learn-ed people to the King to persuade him to deport the Muslims from Abyssinia. There was a debate in front of the King between the Muslims and the Makkan delegation about what and how the Muslims believed. After the end of the debate, the King rejected the requests of the Makkans along with their gifts. This was the first helping hand for the young but frail Muslim community from a Christian ruler.
Source:
http://www.fountainmagazine.com/Issue/detail/Interactions-between-Prophet-Muhammad-and-Christians
Example 2
The Delegation of Najran Christians
No doubt the most important interaction between the Christians and the Prophet was the visit of the Najran delegation to Madina. Makka and Madina had a very small Christian population (Waraqa ibn Nawfal was one of them). The majority of Christian residents lived in Najran. The Prophet’s first important encounter with Christian clergies was in the 9th year of Hijra (AD 631), one or two years before his death.
Prophet Muhammad had been sending official letters to different countries and their rulers, inviting them to Islam. Among these were two different invitations that had been sent to Najran with Khaled ibn al-Walid and Ali ibn Abi Talib. At that time the Najran Christians had a highly organized religious life. Before Islam, foreign teachers had even visited the town, such as the Italian priest Gregentius, which had deepen-ed their religious knowledge. Few of the Najran Christians converted to Islam; the majority of them did not change their religion after these invitations. Prophet Muhammad sent a representative to them, Mughira ibn Shu’ba, who was sent to explain the invitations and the religion of Islam. After discussions with Mughira, the Christians of Najran decided to send a group of people to visit the Prophet. The delegation was made up of about 60 well-educated Christians: A bishop, his 45 scholars, and 15 men. Their intention was to learn the nature of the revelations Prophet Muhammad was receiving.
When the Najran delegation reached Madina, they debated with the Prophet in an investigatory dialogue for two or three days in the mosque (Masjid) of Madina. Prophet Muhammad allow-ed them to pray in the mosque (Masjid al-Nabawi) where the Muslims prayed. The whole incident was the first occurrence of peaceful dialogue between Christians and Muslims; it was the first time that Christians prayed in a mosque.
Prophet Muhammad warmly welcomed the Najran delegation and provided them with a place to stay in Madina, in a secure place close to his mosque. He even ordered that their tent be pitched for them by the Muslims. However, the Najran delegation and Prophet Muhammad were not able to reach a solution in theological terms. At the end of these exchanges, the Najran Christians told the Prophet: “O, Abu al-Qasim, we decided to leave you as you are and you leave us as we are. But send with us a man who can adjudicate things on our properties, because we accept you.” The delegation was granted their request and a written assurance was provided by the Prophet that their lives, property, and religion would be protected. He made witnesses sign this undertaking. The Najran Christians were the first Christian community with whom the Prophet had a jizyah 18 agreement. At the beginning of the meeting, they had disagreements with the Prophet about the concept of the Trinity, but later on they were able to make a social pact. This contract was an initial step that would lead to further developments.
Source:
http://www.fountainmagazine.com/Issue/detail/Interactions-between-Prophet-Muhammad-and-Christians
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My point is that whatever conflicts original Muslims had with Christians and Jews of Medina - they were to ensure survival of Muslims in self-defense. However, this doesn't implies that Holy Prophet Muhammad (SAW) harbored a grudge against Christians and Jews on the whole and/or sought to destroy there states. Never.
Learn more from here:
http://www.fountainmagazine.com/Issue/detail/Islamic-Relations-with-Jews-and-Christians
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Modern day (Israel - Palestine) dispute is a political issue between [residents of the same territory]; an issue that spilled out of control due to Arab interventions in 1960s and 1970s. More importantly, Israel doesn't threatens existence of Islam in any way or form.
Therefore, if a modern Islamic state wants to establish political ties with Israel, then it has every right to do so. There is [no] UMMAH today and neither Jews have the power to threaten Islam. Thank you.
Last time I checked - Turkey have diplomatic ties with Israel.
http://www.jewishvirtuallibrary.org/turkey-israel-relations
Its a shame that some pass judgement on others but do the same themselves.