I figure it this way:

1) The Israelis have changed their terms to "return the kidnapped soldiers and withdraw from the border and allow the Lebanese army to replace Hezbollah". That is a far cry from "the Hezbollah must disarm".

2) By putting the 'ball' in H's court, it then gives Arab 'nations' who could have some influence with H the ability to speak more strongly about it.

3) I think the Israelis are not barbarians (yes, I realize there are over 200 dead; ther are also 24 Israeli dead (civilians)). They have gone after H targets--that is, targets where Hezbollah has buildings, arms caches, missiles. They have not prosecuted a war against civilians. If they had, the death toll would now be in the tens of thousands, IMO.

4) The Israelis have made clear what they want. It has gone from "Hezbollah must disarm" to "withdraw from the border". It is a good decision on Israel's part because it will then take a voice away from their critics and allow people to see what Hezbollah is like.

5) Wishful thinking also plays a part in it.