You're picking on the wrong country here: Jordan is the only country in the Middle East that has pretty much entirely naturalized its Palestinian refugees, who

You're picking on the wrong country here: Jordan is the only country in the Middle East that has pretty much entirely naturalized its Palestinian refugees, who (depending on where you draw the line) make up over half the population. The vast majority of the people living in refugee camps are Jordanian citizens, and the "camps" have long since turned into permanent (if often crappy) housing. As for why the rest don't, one answer is that the other countries don't have to, so they don't give a fuck; and even more cynically, by keeping the festering sore open, they can deflect public attention from their various problems and instead blame Israel for it all.