nation: a large aggregate of people united by common descent, history, culture, or language, inhabiting a particular country or territory.
state: a nation or territory considered as an organized political community under one, or the civil government of a country.Indeed, there is a great deal of overlap. States often comprise of whole nations and are therefore termed nation-states. Examples of nation-states abound in our international system, overwhelmingly in Europe, as a result of the 19th century's nationalist movements (e.g.- England, France, Germany, Italy, etc). By and large, territory and nation overlap in these cases. In that regard my dear reader was quite correct, the term nation and state can be interchangeable, but even in Europe there are plenty of states who proclaim themselves as one-nation states and are not (Spain, Bulgaria, and Russia).
But if we zoom out of Europe and analyze the entirely of our international system, we find the overlap of nation and state to be quite rarer. Most states are not composed of a single population united by commonalities, and indeed are more often than not deeply divided societies. Territorial boundaries were arbitrarily drawn to enclose a population under a single political body with no regard to linguistic, cultural, historical, or ethnic distinctions. A prime example of this is Iraq, where no Iraqi nationality existed prior to its creation by the British, and to this day no Iraqi nation resides in the Iraqi state.
Which brings us to Israel. Zionism is a nineteenth century Jewish nationalist movement based on a two-thousand year religious, historical, and cultural bond. Its successful creation of a Jewish homeland established Israel as a one-nation state despite the existence of a substantial non-Jewish minority within its borders. Whereas all inhabitants have Israeli citizenship regardless of ethnie, nationality is determined by ethnic classification. Under Israeli law, there is no Israeli nationality, no Israeli nation, and consequently no holders of Israeli nationality. There is undoubtedly a distinct non-Jewish minority that resides among a Jewish nation. To say Israel is a nation-state -- or even a nation -- is false, for over twenty percent of its citizens do not share the linguistic, cultural, historical, or ethnic heritage of that Jewish majority.
Globalization and the mingling of peoples has rendered nationalism -- political and emotional association with a particular patria -- obsolescent. Populations within many states are increasingly composed of many backgrounds who do not associate with the national identity. Many modern states have replaced bygone nationalism with constitutional patriotism -- collective association with the values enshrined in a constitutional document -- and have become states of their citizens rather than nation-states.
For Israel to remain a functioning state in years to come, it must adjust to the present circumstances and identify as a state of its constituents, rather than a state of one nation at the exclusion of others.