Just in time for Christmas, Palestinian Authority TV comes out with shows extolling the fact (at least among Palestinians) that Jesus was a Palestinian and the first Palestinian martyr. Christians believe that the Romans executed Jesus to placate a faction of the Jewish clergy who opposed the message Jesus was putting out. Jesus was known as a popular rabbi, and was accused by the Romans of claiming to be "king of the Jews." Some Jews (who later became Christians) accepted Jesus as the long awaited messiah. But most Jews, and all Moslems, do not. Moslems believe Jesus was a prophet sent by God to the Semitic Jewish tribes of what is now Palestine. This is an important point, as Palestinian propaganda considers Jews who don't look Semitic (Arab) to be polluted by alien blood and thus not welcome. The Semitic Jews of Israel (the descendents of those expelled from Arab countries in the late 1940s) are also considered unwelcome, largely because they consorted with the invading Western Jews. These Jews look just like Arabs, and often join the intelligence services, since they make excellent undercover agents.
Palestinian propaganda, meant mainly for internal consumption, depicts all of Israel as "occupied Palestine" and holds that Jews (who have lived in the area continuously for over 3,000 years) have no right to be there. Arab Christians in the neighborhood, some of them descendants of those who were followers of Jesus, keep their heads down amidst all this, as the Palestinian propaganda also declares that Jesus was preaching Islam, over five centuries before Mohammed arrived on the scene. Religion can get you killed in this part of the world, but that doesn't seem to discourage radical interpretations of historical events.
Religious intolerance, as well as religious diversity, are both characteristic of the region. Islam arrived five centuries after Christianity and, like earlier new religions, attracted adherents. What was different about Islam was that it was aggressively seeking to persuade all conquered people to become Moslems. This did not work, as there were always stubborn minorities. In the area that is now Israel and the Palestinian territories, there are several religions that survived, in one way or another, the Islamic conversion effort. The two most obvious groups were Christians (several different sects) and Jews (ditto). But there were others, most of whom pretended to become Moslems, but do so on their own terms. Thus we have the Druze, several flavors of Shia, and others. These Moslem sects are considered heretics by many mainstream Sunni Moslems (especially hard core groups like the Wahhabi and al Qaeda).
For Palestinian propaganda purposes, it's possible to find enough hooks in the complex religious and ethnic history of the region to get many Moslems to believe that Jesus was not a Jew, but rather the first Palestinian martyr. The Arabs tend to keep stuff like this to themselves, thus you will only find these messages in the Arab language media. But it is always there, especially during the Christian celebration of the birth of Jesus.