The Palestinians democratically elected Hamas, who then massacred Fatah. Hamas abducted Shalit; the people of Gaza must bear the consequences of their democratic choice.

As for the killing of its own citizens (500 or so in the internecine Hamas/Fatah dispute), that's the Palestinian's problem. (No voices of protest of course from the human rights crowd, who only get upset if a Jew kills somebody). (cf., Mumbai).

Israel should have given an ultimatum to Hamas (and thus the citizens of Gaza who elected Hamas) that the battle would be joined (i.e., Israel would respond militarily to the casus belli of the abduction of Shalit) until Shalit was returned.

Of course, the next and continuing casus belli was lobbing of rockets into Israel. Again Israel had the right to respond militarily (joinder), to prevent or deter the Palestinians from firing rockets. The concept of "proportionality" applies to the question whether sufficient (or too much) force was employed to achieve a legitimate military end. Here, the legitimate end was to prevent or deter rocket attacks. If the rockets continue, then Israel in fact used insufficient force.

The return of Shalit is a legitimate military objective, and Israel should give Hamas / Gaza an ultimatum: Military actions will continue until he's returned in good health.