For one thing, I think in practice, it's not true that states are no longer founded this way - well, I guess the question is what "this way" means to you, but if you mean "founded in order to be a country for a particular ethnic group", then I think you're wrong - some ethnic minorities really are splitting off from countries in order to form countries for themselves.

In addition, I think there are certainly some people who think ethnic minorities are entitled to founding a country.

As for Israel's founding, there were certainly some problematic aspects, but let's also remember that in some ways it was a much better way to found a country than many others have done. It was land that belonged to the UN, and the UN proposed to make a country there for Jews, as well as for Palestinians. The Jews living in Israel (for the most part, in land that they legally purchased and developed) accepted this proposal. The reason this wasn't accepted was that the Palestinians rejected it, and Israel was attacked by Arab countries. The land that is now Israel is where it is because of a war of defense waged by Israel.

A lot of bad things happened in that time, for sure, but this was actually far better than the way most countries were founded, in many ways. Not perfect, and it did have the effect of a lot of people being displaced, because they rejected a proposal that would give them that land, for various reasons. But better than a country just deciding to conquer another country and just murdering/cleansing all the locals without any thought to it, as is the founding story of most countries.