The sticking point is Israel's insistence that it be allowed to "banish" these prisoners to the Gaza Strip. This places Israel in an untenable position, because Art 49 of the Geneva Conventions clearly says that the occupier can not FORCIBLY deport the occupied out of occupied territory. Get it? Israel's own insistence that Gaza isn't occupied places in in an untenable position, because that argument (and, remember, it is Israel's own argument) makes it impossible for Bibi to FORCIBLY shove those people into Gaza. Hamas knows that, and so does this Israeli government.
4 UN peacekeepers injured in Sinai and taken to hospital in south Israel (Haaretz)