I believe Hamas would agree to a small hostage exchange in a slow and drawn out manner. In the past, Israel literally used an exchange rate of 1000-1 for prisoner swaps. Hamas knows the value of hostages and won’t settle for anything close to proportional swaps. They also need to retain the hostages in order to prolong the conflict and appeal to sympathetic neighboring countries for assistance.
Netanyahu and Hamas both benefit from open conflict and neither believe in a two state solution. It’s a recipe for disaster. The best case scenario is that Israel manages to cripple Hamas, Netanyahu is removed from office, and then a new Israeli Government helps to rebuild Gaza. The worst case scenario is a broad conflict in the middle-east with nuclear weapons in the mix.