It's both more and less than that. As far as ,continued expanison and aggrandizement' goes, I doubt if Israel would have ever seized the West Bank et al if the Arab leaders hadn't given Israel such a golden opportunity to take these territories and feel good about it. On the other hand, continued conflict and hostility DOES serve Israel's interests, as it makes possible many policies that would be quite indefensible without such a smokescreen. Sharon's 2000 walkabout would be a classic example of the sort of measure israel takes to keep that pot bubbling. I don't think Israel really has a 'grand strategy' -- it can't, as any articulation of such a policy would involve admitting many things Israel prefers to deny. On the other hand, it does have a world-view which can only remain valid so long as conflict continues, and so it does act -- how conciously is debatable -- to keep that conflict going.
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from the article: Tossing the ball around