Everything hamas did was useless for Palestinians. Israel isn't stopping because they have the ability. Hamas doesn't, they won't win in a military fight and hostages are useless for them. They could start doing something proper like releasing hostages (woyild decrease support for Israel hugely) but they won't because they think it would help them survive (not even Palestinians).
Hamas had a chance to increase its abilities over time, but instead they chose to spend resources on useless attacks.
I see. I disagree. Hamas's actions are utterly deplorable but also entirely expected. This is what oppressed people do.
I also think you're wrong that Hamas have done nothing for Palestinians. They've never had as much international support as they do now.
Someone's argument above stated that Israel was not going to stop even if all hostages are released. Now you are saying that hostages are a real need for a peace deal. It almost seems like someone is running out of reasons to keep them.
We could also argue if a peace deal (aka keeping the hostages) will be worth all the victims. Or we could just admit that the only way hamas is ever going to use hostages is to try to keep themselves alive.