Hamas only exist as a reaction to Israel's treatment of Palestinians. If Israel wasn't blockading Palestinian land, annexing their territory and destroying their towns to build settlements, cutting off the flow of utilities and goods and basically destroying Gaza and the West Bank an inch at a time, then the Palestinians wouldn't be so angry. Anger makes people stupid, stupid enough to support a party which implements a policy of violence and terrorism which they're too weak to carry through on, invoking further acute violent retribution from Israel and allowing the media to portray the conflict as one between equals, instead of the occupation and conquest of one by the other. It's tragic, because if they'd stop firing their (practically useless) rockets, then Israel would have no excuse to take military action and to try gobble up more Palestinian territory and Gaza and the West Bank would be recognized for the massive-but-shrinking concentration camps that they are.
Of course, if that happened, then Israel would have no excuse to keep up the military action and blockades and would have to slow down their annexation of Palestine, so it wouldn't surprise me if, even if higher reason prevailed in Palestine and they ditched Hamas and stopped their futile efforts at fighting back so they could no longer be portrayed as a country of evil terrorists, Israel would step in and find a way to stir the violence up again anyway as an excuse to keep the blockades up, the rockets flying, the Palestinians dying, and the settlements building.
But at the end of the day, the responsibility for this conflict lies solely in Israel's hands. They're the ones with the power to end it, but they refuse to stop building settlements, and as long as they keep taking more Palestinian land, the Palestinians are going to be too enraged to act in their best interest (I'm not sure I'd be able to restrain myself if someone did to my country what is being done to theirs). It's like an adult bashing up a kid, punching him twice for every time the kid tries to punch back once in self defense. Maybe if the kid stops fighting back the adult will stop bashing him, but even if sheer instinct doesn't drive him to self defense, he has no way of knowing that curling up in a ball and waiting it out will result in the adult not bashing them to death.
Problem is that, at the end of the day, Israel doesn't want peace, they want the entirety of the land they believe was allotted to them by God, and this conflict is going to continue until Gaza and the West Bank are wholly part of Israel, or until the west threatens to cut off military and economic support (which is unlikely, unless something major goes down in the US).
This is the process that Israel wants to complete, and they know all they have to do is maintain the status quo and it will happen eventually, even if it takes another 50 years, or another 100. After all, in their minds they're God's anointed people, and it's the land God promised them, so they can justify anything done to take it and they can afford to be patient.
While I concur with your statement that if the Palestinians realized that their aggression accomplishes nothing but their own misery, I disagree that such action would not result in peace. Might be worth a shot at this point considering the armed alternative has had zero measurable impact over the years in getting them what they want.. I also disagree that the burden lies on Israel, when every attempt they've made at concessions and appeasement have been met with escalated violence and decreased security. People who share this narrative totally dismiss the fact that Israel ripped 25 settlements out of Gaza, and unoccupied it under the promise of peace, yet were met with almost immediate rocket fire in thanks. Then after further easing blockade restrictions, the goods allowed through are used to militarize Gaza rather than helping it. I also find it hard to believe that the "burden" lies on Israel, when the other side has a public mandate to exterminate every man, woman, and child, in Israel.
There are five major things you discount in your narrative:
1) You look at the Palestinian-Israeli conflict in a vacuum, rather than an Arab-Israeli conflict, or even an Arab on Arab conflict. This is myopic for a multitude of reasons, not the least of which is that Palestinian leadership has long been the puppet of other middle-eastern dictatorships who have nothing to lose by waging war with Israel via proxy. What interest does Qatar or Iran have in the Palestinians making peace with Israel? You also discount that Israel has/had been attacked by the Palestinians since day 1 of their existence, and multiple times since then by various Arab neighbors, and the consequent impact this has on Israeli trust of their neighbors as well as their perceptions of their own security.
2) Your perception of Palestinian motivations is based on a Western interpretation of rational thought. You base the Palestinian "desires", as well as the basic cause/effect you assume would play out, on a secular minded playbook. Just like a Saudi citizen would consider himself a Muslim first and a Saudi second, so do the Palestinians. So when you ignore very little precedence for peace in the middle east, even between Arabs, and then view Palestinian motivations in a vacuum, you basically reject history as a useful tool in painting future intent. When you ignore the successful peace agreements Israel has forged with its neighbors (and the circumstances that precipitated them) and dismiss this precedent while simultaneously ignoring that none of these neighbors did so under peaceful circumstances, you again look at this conflict in a vacuum. When you make no mention of how Islamic teachings influence the concept of "peace", and how best to achieve it, you again base your interpretation of events in a Western mindset.
3) Like everyone that lays the blame on Israel, you entirely ignore the absolutely atrocious exploitation of the Palestinians not only by Hamas, but by Arafat as well. The reality is that Gaza has been a foreign aid black hole for years, with literally billions of dollars diverted away from the population to line a corrupt government's pockets. We're not talking "skimming" here, but wholesale diversion of monetary aid and tax money, enriching their leadership and allowing them to build an entirely fruitless terror machine to keep the cycle going. Tell me, what financial or socio-economic motives does Hamas have in enriching the lives of Palestinians?
4) The Palestinians have 26 political and militant factions. Keeping them agreeable is about as hard as keeping some supermodels stable when you take their cocaine away. This again ties into this whole concept of divorcing them from the rest of the Arab world when viewing their motivations, as well misinterpreting their CAPACITY for peace. Just like the rest of the Arab world, ultimately its all about tribal animosity. Even IF Israel was able to make peace with some sort of legitimate Palestinian government, the attacks are unlikely ever to stop because the Palestinians can barely control their own factions. Even IF Israel was to revert entirely to 1967 borders, the attacks would STILL come. And that isn't assumption, it's explicitly stated by various Palestinian militant factions. In fact, the only thing preventing these factions from waging war on each other is because their hate for Israel is greater.
5) Finally, and keep #4 in mind here, current day Israeli motivations for settlement expansion have very little to do with religion. Formation of Israel, yes, settlement building, not so much anymore. Yes, you have a minority ultra-religious component of society that waves this flag, and they frequently end up as their residents, but most settlement expansion these days is conducted for two reasons 1) A significant amount of Israelis rightfully view their withdrawal from Gaza and resultant shitstorm as a betrayal of peace, so they say "screw it, we're going to get rockets and suicide bombers whether we cede land or not". They also listen to Palestinian leadership announce daily that NO land, not a single square km, belongs to Israel, ever, so again they just say "what's the point" and 2) many of these settlements are basically armed civilian "listening posts" meant to buttress security. Now, I am not condoning settlement expansion, I think its wrong, but that is the current day psychological motivation behind it.
Everybody can hypothesize the "what if's" all they want. People can furthermore paint these "what if's" under the rose colored lenses of Western morality and motivations, and transpose these onto radical Islamic leadership, but I feel this to be na?ve. You can make a "what-if" conjecture that if Gaza took the peaceful route they'd get fucked, but if you're an Israeli, there is no conjecture or "what-if" needed. If you're an Israeli (and you REALLY should make an effort to think like one for a second) the only "what-if" you care about is the one where Gazan leadership openly advertises the desire for your genocide, and incites its population to do so. That isn't conjecture, that's an actual promise.