This question has been talked about all over the globe recently. To be sure, it was a very difficult decision for the Israelis. There were many pros and cons. Here are a few:
1. By agreeing to trade Gilad for over a 1000 terrorists, this sends the terrorists a message that all they have to do is kidnap one Israeli and eventually they'll get to free thousands of their brothers in prison.
2. Justice is not served. There are thousands of convicted terrorists sitting in Israeli prisons. Israeli courts have spent many gut wrenching months prosecuting these animals and have doled out sentences at the time. Now all of a sudden, they are free.
3. Israeli families and friends of the victims of the terrorists are suffering. It was hard enough for them to suffer the losses at the time they occurred; teenagers in discos, innocent civilians eating at restaurants, children killed in school buses, etc. Not to mention the many thousands of injured Israelis, hurt by the many suicide bombers and other Arab terrorists. Now they must add insult to injury by seeing the convicted terrorists walk free.
1. Gilad Schalit has become an icon for the fight for justice. Almost the entire world is familiar with his plight. Freeing him after all this time in captivity represents a huge success for Israel, both internally and to the world.
2. In Judaism, life is sacred. Unlike their enemies who don't value life at all, so much so that Arab mothers encourage their children to become suicide bombers, Israelis will do almost anything to save one of their own. Like many other things the Israelis do, they try to elevate the world to a higher standard - by example.
3. There are tens of thousands of convicted Arab terrorists in Israeli prisons. The cost to this tiny country is out of control. For much the same reason that they cannot not afford to govern hundreds of thousands of their enemies living in both Israel proper and what they called the West bank, the Israeli prisons are a microcosm of that. It costs Israeli's well over a million dollars a year just to house 1000 prisoners a year.
4. I'm sure that Netanyahu does not see this simply as negotiating with terrorists to free 1 soldier. He sees this as part of an overall strategic plan. This complex strategy has to do with the 'peace negotiations' with Abbas and engaging Egypt, US, Europe and others.
5. But by far the most overlooked 'Pro' for making the deal has got to be to help the IDF's moral. Every Israeli soldier needs to know that before they risk their lives defending their country, that their country has their backs. Should they get in trouble behind enemy lines, they must know that without a doubt, they will be rescued at all costs. Without strong moral, as one of Israel's most important resources, the IDF cannot operate successfully. And if that happens, many more lives will be lost.
I do agree with the premise of never negotiating with terrorists. Terrorists should be killed not negotiated with. But in this case I think Israel had no choice. That said, in my humble opinion, Israel's mistake was taking thousands of terrorists as prisoners in the first place.