The upshot of Israel's decision to release a thousand criminals and terrorists to retrieve one lone prisoner is surely to strengthen Hamas and further weaken Abbas and Fayyad. Yesterday was a pretty dismal one for the PA in the West Bank, their entire rationale of dealing with Israel through non-violence and international institutions revealed as far less potent than Hamas' deployment of terrorism and war crimes. It was, in that sense, a great coup for Netanyahu. Removing and weakening the non-violent wing of the Palestinians is critical to his long term goals for Israel, hence his intransigence when offered a real window for peace by the Obama administration. Anything that empowers the PA disempowers Hamas which disempowers Netanyahu.
The Shalit deal with Hamas was caused by many factors – the resilient sense of solidarity Israelis feel toward their soldiers, the possible loss of Damascus as a base for Hamas, the canny public relations campaign of the Shalit family, the sense that Egypt's evolution might preclude a similar role as interlocutor in the future, etc. My own view, drawn from observing the far-right government in Israel, is that if the deal looks as if it is designed to undermine the PA and any possibility of renewed talks, by undermining popular support for non-violence, it probably is.
In many ways, Netanyahu needs Hamas. If he can obliterate moderate and non-violent Palestinian factions, he can justify his real goal: the annexation of the entire West Bank. Once you see the imperative of Greater Israel as the core principle of the current Israeli government, a lot of things make more sense.
The Dish 