I don't know what country would put up with rockets being fired at them randomly along with suicide bombings, again and again for years. I think any with the military power would use it to the extreme, as we have seen Israel do over and over. It's not right, but we have seen it all over the world throughout history.
I know most people are bothered by the root of the cause for the situation, but we can't undo history. Israel is a State whether we like it or not. We've seen terrorism on both sides that started before its existence.
So how is the problem solved? I have no idea.
There is no reasonable solution right now, at least not with Hamas involved. Israel is not going to open up their borders, ease the blockade, give land back, etc.. while Hamas has anything to do with it. I think it's obvious that there will be no peace as long as Hamas has any control over the palestinians.
This might be the case even if Hamas is not involved. It depends on what group comes to power and how far each side is willing to go to compromise. I don't think either is willing to give up enough to end this conflict, so for now, and probably the rest of our lives, Israel will continue to isolate palestinians and kill a lot of innocent people, and Hamas will continue to poke the bear.