I don't think there's a reasonable way to look at this situation and come away thinking that more Gazan civilians will be alive if Hamas continues fighting.
Even still, I do not agree at all that if Hamas stops fighting, Israel would immediately stop hostilities. I think they have proven very clearly, through words and actions, that they are seeking to break the spirit of Palestinians (or at least of Gazans), and to punish them for October 7th. If Hamas surrendered, Israel would just claim that they didn't, that it's either a ruse or that only a handful of the terrorists have surrendered and they need to continue the killing until they can confirm.
Again, I would say, the Rule of Lord Farquaad applies.
The alternative argument seems to be that Hamas should sacrifice Gazan civilians to make a moral point. There's a scene in Shrek about that kind of logic.