Does the blessing of Genesis 12:3 extend to Palestine or is it only for Israel (and the church as the spiritual Israel)? I was reading 12:3 and I started to wonder whether or not that blessing was for Palestinians too, as descendants of Abraham. Thank you.
Does the blessing of Genesis 12:3 extend to Palestine or is it only for Israel?
The Bible quite clearly shows the Genesis 12:3 blessing being passed along for several generations, bypassing the ancestors of the Palestinians.
God did provide their ancestors with blessings, but not the specific blessing of Genesis 12:3, which was the beginning of the old covenant.

Modern Palestinians are Arabs, descended from Abraham's son Ishmael (Ishmaelites - Wikipedia).
God told Abraham to pass his blessing on to his second son, Isaac, not to his son Ishmael.  God provided a separate blessing for Ishmael:

And God said, Sarah thy wife shall bear thee a son indeed; and thou shalt call his name Isaac: and I will establish my covenant with him for an everlasting covenant, and with his seed after him.
And as for Ishmael, I have heard thee: Behold, I have blessed him, and will make him fruitful, and will multiply him exceedingly; twelve princes shall he beget, and I will make him a great nation.
— Genesis 17:19,20

The Covenant that God made with Abraham was passed to Isaac, not to Ishmael, and so not to the ancestor nations of today's Palestinians.
Similarly, Isaac passed the blessing on to his son Jacob, not to his eldest son Esau, who had sold his right to the blessing to Jacob:

And Jacob said, Swear to me this day; and he sware unto him: and he sold his birthright unto Jacob.
— Genesis 25:33

Esau (also known as Edom - Wikipedia, possibly the ancestor of modern Turks) also received a blessing, but it was a different blessing (Gen 27:38), not part of Abraham's covenant with God.
Later, because of Reuben's transgression, Jacob (Israel) passed the spiritual blessing to his son Judah, and the physical blessing to his son Joseph, rather than to his eldest son Reuben:

Now the sons of Reuben the firstborn of Israel, (for he was the firstborn; but, forasmuch as he defiled his father's bed, his birthright was given unto the sons of Joseph the son of Israel: and the genealogy is not to be reckoned after the birthright. For Judah prevailed above his brethren, and of him came the chief ruler; but the birthright was Joseph's)
—  1 Chronicles 5:1

Centuries later, when the kingdom split into two, the Jews (Judea, descendants of Judah) retained the spiritual blessing (the Messiah would come from them), while the name &quot;Israel&quot; went with Joseph's sons:

The sceptre shall not depart from Judah, nor a lawgiver from between his feet, until Shiloh come; and unto him shall the gathering of the people be.
…
The blessings of thy father have prevailed above the blessings of my progenitors unto the utmost bound of the everlasting hills: they shall be on the head of Joseph, and on the crown of the head of him that was separate from his brethren.
— Genesis 49:10,26