I highly commend this post from Noah Millman:
If the Gaza embargo is legal (I'm not an international law expert - it would be if Gaza were an independent state, but Gaza's status is kind of sui generis so I'm not sure) then intercepting the flotilla on the high seas was legal and, while the operation was clearly a fiasco, once the foolish decision to board with a handful of commandos (rather than disable the ships and tow them to shore) was made the use of deadly force by same in self-defense was understandable.
But whether or not the Gaza embargo is legal, the point of the flotilla was to demonstrate that the policy is morally wrong - that it's a policy that logically requires Israel to attack ostensibly allied ships and kill civilians on board in order to prevent Gazans from importing basic supplies for normal civilian life. In this, it seems to have succeeded admirably well.
He later describes the understandable dynamic on the Israeli side:
I get notes all the time from family and friends in Israel. These are generally liberal, secular people. None of them are settlers. None of them vote for Likud, to say nothing of parties further to the right. Overwhelmingly, the sentiment among people I know in Israel was in favor of the Gaza war, in favor of the embargo and blockade, in favor of a policy of collective punishment against the people of Gaza.
The reason is simple. From the perspective not only of the Israeli center but of people who consider themselves basically on the left, though not the far left, when Israel unilaterally left Gaza that meant the Gazans "got what they wanted" and left no basis for continued hostilities. The fact that, after the withdrawal, Hamas rained mortars and rockets down on Israeli territory, proved that Hamas had no "legitimate" political goals but was simply interested in destroying Israel and killing Jews. After that, whatever Gaza got, from their perspective, they had coming to them, and there's nothing more to say.
Israel's policy-making no longer seems to me to be particularly related to concrete policy objectives at all. Neither the Lebanon war nor the Gaza war had actual military goals. Both were essentially wars for domestic consumption. Hezbollah and Hamas were firing rockets at Israel, and Israelis were understandably furious. "Something" had to be done about that, to let the Israeli public know that their leadership felt their fury. So the government did "something." Outsiders criticized the disproportion of the response, but the point of the response was its disproportion - not because the only thing the enemy understood was force, but because, in the absence of any way to actually solve the problem, the only thing that would convince a domestic audience that the government felt the way they did about the situation was to respond with a fury proportionate to that of the electorate.
I'd only add that in my limited experience with Palestinians--again, liberal, secular Palestinians--you could change the words of this slightly and describe the dynamic on the other side pretty accurately, with the caveat that the other side is more desperate, among other reasons because populations under military occupation usually are. And no, thank you, that is not a defense of terrorism, any more than it is a defense of launching military operations that kill a bunch of people without having reasonably achievable military objectives.