A declaration of independence is “viewed as an act of war”, fine, so they went to war with Israel and lost.
“Israel’s declaration promised to work with the people of Palestine”—- Obviously, it was not good enough, because five Arab states attacked Israel then next day.
There were not Israeli settlements in the West Bank or Gaza until after the 1967 war, and yet Israel was a constant target, so it was never about settlements. The settlements started out as buffer since Palestinian Arab could never control their borders, so Israel occupied the West Bank after taking it from the Jordanian occupiers who used it as a launching pad to attack Israel.
As for the legal weapons blockade, it is legal if you read the laws of blockade.