I’m not sure which political system they are shut out off - the Palestinians have their own political system and leaders. It’s just not democratic.
They are also not under any military rule except their own. Almost all of the Israeli military presence in Gaza and the west bank is either during wars (ridiculously called operations), or in checkpoints between these territories. They are currently fighting against a de-facto foreign government.
But you know what, let’s assume that the situation is as you describe it. So, what you’re saying is that there is an apartheid and the Palestinian want, in fact, to participate and vote for the Israeli government but are blocked from it. You’re also saying that these settlers are all pure evil and want to inflict pain and suffering out of sheer sadism and hate. They deserve a death sentence. Is that about right?
In the context of the Israeli/Palestinian conflict:
Settlements - refers to illegal makeshift “towns” (usually no more than a few trailers) built on lands that belong to Palestinians by right wing Israeli extremists who believe that the entire land belongs to them. As of 2006, these are strictly in the west bank.
Everything else (city, town, kibutz etc) - traditional meaning but also indicates that they are within the official internationally recognised Israeli border.