Israeli government has Arab list in it, with Arab ministers: https://en.wikipedia.org/wiki/United_Arab_List
Not the parliament - the government itself. This is by definition not an apartheid state.
This law denying citizenship is to block a loophole used by known terrorists to come into Israel and explode Jews on busses. Here are some examples for you: https://en.wikipedia.org/wiki/2001_HaSharon_Mall_suicide_bom... https://en.wikipedia.org/wiki/Sbarro_restaurant_suicide_bomb...
Why should Israelis allow a terrorist loophole in? Would you allow a way for terrorists to kill you and your family in your home country? I didn't think so.