> For one it's a 78 year old colony that excludes the indigenous Palestinian population from returning to their ethnically cleansed homes.

The ethnic cleansing that happened when Israel gained independence was not in just one direction, Israel also did allow plenty of Arab/Palestinians to stay and gave them citizenship where feasible. It's not surprising however that Israel doesn't currently offer citizenship to a population that largely doesn't think Israel should even exist. States don't normally give citizenship to their non-citizen enemies.

> They also allow people to convert to Judiasm and enter, so it actually has nothing to do with their ethnicity and is solely based on religion.

It's not solely based on religion. It's also quite rare for people to convert to Judaism in general so that exception has little practical implications.