For my money, the worst mistake Israel made was the mistake that led, ultimately, to the siege of Gaza: The 2005 unilateral withdrawal. Leaving Gaza wasn't the problem, of course -- you'd think the Jews would have learned sooner (see: Samson) that Gaza is no good for Jews, and Ariel Sharon was right to get out. But the method he used was tragic. By refusing to negotiate his exit from Gaza, he strengthened the hand of Hamas. If he had negotiated the withdrawal with the Palestinian Authority, he would have a) extracted concessions from the Palestinians, and b) strengthened the moderates. The moderates would have been credited by their people for coaxing Israel out of Gaza. Instead, Hamas won the round, and then won the election, and then won the coup, and then, in a way, won the most recent war against Israel, and certainly the public relations war, which is the sort of war that really matters in the Middle East, and which Israel almost never fails to lose.
Matt Yglesias thinks that analysis is descriptively spot on, but says it wasn't a "mistake", because many of the architects of the pull-out were trying to slow down the peace process and delay pressure for further change.
There's obviously truth to this, but I think this is overstated in the same way that general efforts to discern the "intent" behind legislative goals supported by a broad coalition of political actors are usually misguided. The hope that disengagement would delay the peace process may have motivated the more conservative members of Sharon's coalition, but it seems weird to say that the more liberal MKs had the same instinct. And most of the opposition in Israel to withdrawal came from the right, not the left. Meanwhile, while the chain of events identified by Goldberg certainly are not positive developments, I doubt that Sharon, were he to awake from his coma, would dispute that -- he wouldn't be proclaiming that his plan went according to playbook.
On the broader indictment of Israel's current policy on Gaza, one thing I've been meaning to say is that I'm not sure if there is anyway to get the supporters of the status quo to admit defeat. The stated goals of the current blockade are, of course, to break Hamas and end terrorism against Israelis. Of course, it is pretty clear that the policy is a failure in these respects -- Hamas remains firmly in control, and its capacity and desire for terrorist violence has waxed, not waned. And that very fact -- that Gaza still remains radicalized -- is then used to justify continuing the blockade. The fact of failure is the warrant for not amending the failed policy.
I don't want to push this too far -- I think this is part of the broader what do you do when nothing works problem -- but it is worth noting.