Robbie Sabel and Oded Eran have an interesting solution for the Palestinian refugee problem. In an op-ed piece (no English translation is currently available) in today's Haaretz they say that Israel should agree to the return of those refugees who were physically present in what is now Israel and became refugees during 1947-1948. Their descendents would not be allowed to come with them, since they were never here, but rather were born elsewhere.
Repatriation of the original refugees would mean that Israel abides by Resolution 194, readmitting those who left or were driven out and are now willing to live in peace within Israel. According to Sabel and Eran, there are currently about 42,000 original refugees, and it is not known how many of them would want to return.
Sabel and Eran correctly argue that even if we agree to take in refugees, we must not call it an implementation of the right of return. Saying that such a right exists for this smaller group (and it really doesn't) may strengthen calls for the right of return of the generations born after 1948 as well.
In addition to the repatriation of older Palestinians, some form of compensation and reparations for loss of property would also be paid.