I don't like the fundies who are doing it or the way they treat the locals. They are clearly an encroachment on Palestinian territory, and I can understand why they represent an existential threat to Palestine and are such a point of contention.

I understand why Palestine loathes them, and why Israel ignores them. From the Israeli perspective ignoring them is good game theory. This is a reasonable, (but perhaps not ethical,) response to an enemy who refuses to negotiate a viable solution despite the realities of the situation. Unless Palestine comes to the bargaining table in good faith, willing to make some concessions, they will eventually lose everything. This puts continual pressure on them to do so, if they do not they will continue to lose territory. They have been overwhelmingly defeated time and time again but refuse to acknowledge this, leaving Israel with few viable options to deal with the threat that a hostile and belligerent Palestine represents. There's little else they can take from them but the land, and they still seem unwilling to compromise. This will either bring them to the table or leave them without a home, either way resolving the threat in their favor.