Judt has argued the same things before Sand's book, and it is curious why such a stupid idea is still respected enough to be published. His similar 2003 essay in the New York Review of Books gets into more detail about how such a state would work - it would require an international police force to stop Arabs from killing Jews! ("The security of Jews and Arabs alike would need to be guaranteed by international force.") Yeah, a state that requires outside help to police its own citizens is really viable! His idea is apparently to return to the good old days in the 1930s when the British were forced to deal with an Arab intifada and "intrafada" that killed hundreds of Arabs as well as many Jews - and British as well.
Critiques of the 2003 article can be seen here, and the comments section of FT has plenty of other interesting criticisms, pointing out that Judt seems to hate only one particular type of nationalism enough to want to eradicate it even though his arguments would pretty much demolish every nation state if applied equally.
The Sand connection is tenuous. I'm not going to go into the details of Sand's sensationalistic and bizarre book here (a good critique can be seen here, and my main question to him would be whether the phrase " מי כעמך ישראל גוי אחד בארץ " predates the nineteenth century) but Judt doesn't even use Sand effectively to help his argument, saying that somehow if all the Jews of Israel weren't exiled in the first century CE ... Israel shouldn't have been created. There are a lot of unwritten assumptions in that ellipsis.
Briefly, Sand points out that many, or most, Jews did not leave Israel immediately after the Roman conquest. This is well known. After all, the Jerusalem Talmud was written inside the borders of the Land of Israel centuries after the destruction of the Temple. Judt bizarrely seems to be claiming that if the Jews weren't forcibly expelled, then they have no right to want to return. He might want to glance at the lyrics to Hatikvah to gain a more sophisticated, nuanced and accurate view of the point of Jewish nationalism:
Our hope will not be lost,The operative word is חופשי, free.
The hope of two thousand years,
To be a free nation in our land,
The land of Zion and Jerusalem.
(The reference to Jerusalem must really drive him crazy.)
There's plenty more to criticize with Judt, but one more point to ponder: if Jewish nationalism, an unbroken idea that spans millennia, is a myth, how real is Palestinian Arab nationalism?