fairandbalanced, I'm afraid your viewpoint doesn't exactly tally with the reality of what happened. Yes, the blockade was lifted somewhat in 2005, but I wouldn't exactly describe leaving the Palestinians in prosperous, self-determined utopia.
The blockade was then re-established after Hamas came to power in 2006.
You're also not correct about Hamas using aid money simply to pursue "terror tunnels" instead of civil spending. Please see the following:
"Hamas is popular among Palestinians in the Gaza Strip, though it also has a following in the West Bank, and to a lesser extent in other Middle Eastern countries. Its popularity stems in part from its welfare wing providing social services to Palestinians in the occupied territories. Such services are not generally provided by the Palestinian Authority. Israeli scholar Reuven Paz estimates that 90% of Hamas activities revolve around "social, welfare, cultural, and educational activities". Social services include running relief programs and funding schools, orphanages, mosques, healthcare clinics, soup kitchens, and sports leagues.[58]
In particular, Hamas funded health services where people could receive free or inexpensive medical treatment. Hamas greatly contributed to the health sector, and facilitated hospital and physician services in the Palestinian territory. On the other hand, Hamas's use of hospitals is sometimes criticised as purportedly serving the promotion of violence against Israel.[59] Charities affiliated with Hamas are known to financially support families of those who have been killed or imprisoned while carrying out militant actions or supporting such actions. Families typically receive a one time grant of $500 to $5,000, and those whose homes have been destroyed by the Israel Defense Forces have their rent paid for temporary housing. Families of militants not affiliated with Hamas sometimes receive less.[60]
Hamas has funded education and built Islamic charities, libraries, mosques and education centers for women. They also built nurseries, kindergartens and supervised religious schools that provide free meals to children. When children attend their schools and mosques, parents are required to sign oaths of allegiance. Refugees, as well as those left without homes, are able to claim financial and technical assistance from Hamas.[61]
The work of Hamas in these fields supplements that provided by the United Nations Relief Works Agency (UNRWA). Hamas is also well regarded by Palestinians for its efficiency and perceived lack of corruption compared to Fatah.[62] Since the 2008–2009 Israeli military operation in Gaza, Palestinian public opinion polls have shown Hamas steadily increasing in popularity with 52% support compared to 13% for Fatah. All public opinion surveys conducted recently have supported this trend.[63]
Despite building materials needing to be smuggled into the territory, luxury beach resorts and tourist facilities operated by the interior ministry have been constructed by Hamas government–linked charities, including gardens, playgrounds, football fields, a zoo and restaurants aimed to provide employment and low cost entertainment for citizens. Some Palestinians have complained about the admission fee, criticizing Hamas for charging them to use "government-owned" property.[64]"
I personally don't care for Hamas as I'm not someone that would ever support a religious-based political party, and I do think that electing them has made life in Gaza a lot harder, but I can also completely understand why people voted for them, what a sense of frustration and desperation they must have felt.
I also think that the whole rhetoric of simply denouncing them as terrorists is simplistic and completely stands in the way of negotiating some sort of peace.
They were pretty much on the brink of giving up power in Gaza anyway. They were broke - internal tensions in Iran etc meant that their remaining sources of funding had dried up. Hence looking to form a unity government with Fatah.
But Likud doesn't WANT unity between Gaza and the West Bank. Likud has never acknowledged a two-state solution for Palestine.