Last I checked the question of democracy didn't expand to occupied territories. When the US occupied Afghanistan or Iraq (or German or Japan) those countries did not get a vote in the US elections. Puerto Rico also don't get a vote in the US?
Handing over the west bank to Palestinians isn't an option because: a) the world would not recognize that as the end of Israel's occupation just like it didn't accept Israel's handing Gaza over as the end of the occupation. b) That area would be taken over by Hamas just like Gaza was taken over and would be staging ground for launching attacks into Israel just like Oct 7th or the rocket barrages that came from Gaza over the years since Israel's withdrawal. The West Bank has a significantly longer border with Israel which would put most major Israeli cities minutes of driving and within rocket/mortar range. c) The option of annexing the West Bank and Gaza and making everyone citizens is also not acceptable to either the Palestinians or the international community.
This really answers your unasked question of why is this area under military occupation for so long (IIRC Germany and Japan were also controlled for a pretty long time but anyways). Initially Israel needed the area so Arab armies aren't sitting 10 minutes from its population centers (when the entire Arab world was still at war with Israel). Now that there's peace with Jordan and Egypt it's more of a Palestinians aren't willing to make peace in exchange for this land, they don't want to become Israelis, and there's no realistic option that ensures both the safety of Israelis and their rights and the rights of Palestinians.
After all this you might be right to complain about e.g. settlements in the west bank. And there I'd finally agree with you. Israel should not allow Israelis to live in the west bank before it's final status is determined. That said, it wouldn't really make the problem that easier to solve, if anything it is taking us closer to a day where that area is annexed and Palestinians do become Israeli citizens.