These same proposals were given decades ago when it was the PLO Israel was having to deal with. Israel followed them, at the behest of the international community. They didn't work--we know this because it's now decades later and the same problems still exist. Isn't the classic definition of insanity trying the same thing over and over again but expecting different results?
It's pretty well established that tactics that produce widespread civilian casualties just create the next generation of insurgents. In that respect, Israel's current actions seem to match the definition of insanity.
In the sense that Israel failed to reach a stable endpoint to this conflict once before, in 2009, yes, I suppose this is true. They should have destroyed Hamas then, and they didn't. Which would suggest that Israel should finish the job this time.
They could make meaningful steps towards a one or two state solution in order to undercut Hamas' power.