The way war usually works, is the side that feels it has something to loose, sues for peace by making concessions. However the international backing of Hamas has ensured them that they have nothing to loose, and everything to gain, by attacking the Jewish state.
Also, most of the people in Gaza are not Hamas members and are regular civilians. What Natanyahu is doing is basically analog to the following:
A killer take a member of your family as a hostage (Hamas in this case is the killer) so you decide to kill a member of their family every hour until they release your beloved one. Do you think that this is acceptable or are you trying to make it acceptable?