One should recall the Liberty incident during the 1967 war. The US ship was misidentified, fired on in international waters, and 34 American sailors were killed. Israel agreed to pay compensation to the killed, wounded, and the US Navy for damage to the ship. (Each killed was paid about $100,000.) Of course, Israel went out of its way to reconcile with the Great Friend USA. Had she wanted, Israel could have argued that she was not guilty, war time, the Liberty should have been more cautious, etc. Perhaps a court would have accepted such claims, but that was not the point. With Turkey, the situation is not that different, because Israel does carry some guilt, although good lawyers would be able to come up with arguments to reduce it. Where is the guilt: The "siege" of Gaza was needless (and Israel in now realizing it), and the resistance of the passengers could have been taken into account in a serious way so that a different method of stopping the ship should have been used. The special alliance with Turkey, which was desired and pursued since David Ben-Gurion, is worthy of preserving. Pay, and put an end to the dispute.
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Preliminary report: Shooting attack in East Jerusalem's Damascus Gate (Haaretz)
from the article: Turkey president cancels talks with Peres, but plans to meet Ahmadinejad