the unlawful use
It's not unlawful to take land during a war. It's just shitty, in most instances.
This is why the settlements were (international viewed as) illegal (or, in the most generous of terms, of extremely questionable legality) prior to the war but aree authorized during the war specifically. Plays a lot better, in terms of international politics.
I would love to see the US make any aid to Israel conditional on a complete reversal of this policy and development of the West Bank in general. Would do a lot for the eventual peace process, as a nice side effect.
Edit: from the link in the article, about the background here
The deal would include gestures to the Palestinians. Among the suggestions has been a freeze in West Bank settlement activity, including the authorizations of outposts. Netanyahu’s government has been opposed to any such demand within the context of the Saudi deal or any other framework.
Prior to the war's start, it was very politically unpopular for them to build settlements on outpost territory. Not the gloves are off, because they have plausible reasons in the international community.
The US has the power to take that plausible reason away, and should do so.