I have heard the following too (which is far from a solid reference for it being true): that the military cannot go and crack down on “Jewish settlers” more precisely because they are Israeli citizens and therefore only the cops are authorized to deal with them as criminals, except in the case of martial law and suchlike. Whereas the “Palestinians who were born in the actual town” are not Israeli citizens.
I.e. if someone were to go arrest settlers who brutalize Palestinians on charges of terrorism, hate speech, etc.. it would not be the Israeli army.
Does the U.S. criminal justice system have any jurisdiction outside the U.S.? Becasue we are not talking about territories annexed by Israel— these are places in the West Bank, Lebanon, Gaza, etc. One wonders how many of these Jewish settlers would actually stay if they found themselves in the middle of a Palestinian state tomorrow, one with laws under which they could be prosecuted.