The term 'Occupied' is often used loosely, even in Israel itself.
The version of 'Occupied' that I'd like to address means: Israel has no claim to any part of the West Bank, is hence illegally present in all parts of it, and should, by international law, withdraw.
This version of 'Occupied' is not supported, as far as I know, by either the US, the EU or the UN security council. If you think it is, I'd be interested in seeing some supporting data.
Even if it were supported by these bodies though, I don't see how that would be enough to make the territories occupied in the sense quoted above. The position of international bodies is, regrettably, often driven more by interests than principle. Ninety years ago, for example, major international organisations (The League of Nations, European powers, the Ottoman Empire) supported Israel's (to be) claim to all British Mandate territories, which includes the West Bank. Agreements were signed [1], and ratified by the UN at its founding.
What I am saying is, that each side in this conflict has legitimate claims to the territory, and that both sides' claims are supported by past international resolutions and treaties, by a historical presence in the land, and perhaps most importantly, by an agreement between the sides themselves - the Oslo Accords.
No reasonable Israeli, including myself, is interested in prolonging Israeli rule over the Palestinian population. I even believe, as I think do most Israelis, that within a comprehensive solution to this conflict, it is in Israel's strategic interest to treat the West Bank as largely Palestinian territory, regardless of any claims and rights Israel might have to it.
Israel has, several times in the past, agreed to withdraw from most of the West Bank, most notably during the Camp David accords of 2000, and the succeeding peace plan put forward by Clinton ("The Clinton Parameters"), which were rejected by the Palestinians at the time. A comprehensive account of events is given by Dennis Ross in his book "The Missing Peace", which I can warmly recommend to any student of the conflict.
Israel's current military presence in most of the West Bank, is, as I see it, largely a security issue. After Israel's 2005 withdrawal from Gaza, a Palestinian civil war ensued that resulted in Hamas rule over Gaza. Hamas openly calls for Israel's destruction, and backs it up with routine rocket fire into Israeli population centers.
Israel is a liberal democracy, largely driven by western values of equality and prosperity. Our neighbors are, sadly, not. Along with most Israelis, I hope that a peaceful resolution to this conflict can be found, and take no issue to with eventual Palestinian control over nearly the entire West Bank and East Jerusalem.
PS. If anyone would like to continue this discussion by email, I'd be happy to do that - david [at] skillsapp [dot] com
[1] http://en.wikipedia.org/wiki/San_Remo_conference