There is no doubt that these people are disgusting, but thankfully they are also rare. Every society has their fringe crazies - the US has Westboro Baptist Church, for instance - and they generally get way more attention than they deserve by being controversial.
This isn't to say that there isn't a problem with Israeli society's attitude toward the Palestinians, it's just to say that I think it is a problem that is far more subtle and widespread. Focusing so much attention on a small percentage of religious fanatics can be important because it does represent a movement and ideology that is problematic, but it has very little direct relevance to the current conflict.
The real problem, in my opinion, is a unique mixture of nationalism and a lopsided insulation from the reality of the conflict that is very common in Israeli society.
Israeli society is uniquely coherent in a particular way that stems from the relatively homogenous cultural identity facilitated by Judaism, and this coherence is also strengthened by the fact that Israeli society was built in the face of and as a direct result of considerable adversity. I think that this does allow for a sort of groupthink that inhibits Israel's ability to treat the Palestinians in a humane manner, but the effect manifests itself through society as a sort of cultural blindness and it manifests through the political process as hawkish policy.
(Also, whether or not you think they had the right to build that society in the first place is beside the point right now, I'm only talking about the existence of the unifying influence of adversity, and the effect it has on policy and the national psyche)
The other component of it is the simple fact that Israelis are extremely insulated from the realities of the Palestinian sufferings.
Even in the heat of a conflict like this, Israelis can pretty much go about their lives unimpeded. It is true that the rocket attacks are disruptive and that there is on a whole an unacceptably high level of danger from external attacks, but Israelis have leveraged a security apparatus that minimizes these realities in day to day life to an astounding degree, all things considered, and this fact is a double edge sword that creates a perfect breeding ground for indifference.
One side of the sword is that these measures are extremely effective at improving the lives of Israelis in the short term. However the other side of the sword is that it obviously makes these measures popular and politically successful. Furthermore, with all the calm and prosperity, it is very easy to forget about the abysmal conditions being imposed on 1.8 million people just thirty kilometers or so from your doorstep. The only time they really have to deal with the issue is when there is an inevitable flareup of violence at which point, naturally, people tend to be less empathetic. The rest of the time, during the lulls, the prospect of empathy is just placed on the back burner.
These are the tendencies that need to be addressed.
However calling Israel the 4th Reich and placing so much focus on youtube videos that give Israel's religious fanatics undue prominence is just as useless and destructive as all the Israelis and Israel sympathizers who insist on viewing Palestinian society as an unchanging, violent monolith that is accurately represented by its extremist elements.
The fact of the matter is that there are significant movements within Israeli society that are in fact attempting to change these trends. The same is true of Palestinian society, however it is more difficult for those movements because of the repressions imposed by Hamas, culture and environment.
If there is to be any hope in this situation, Israel's role as the dominant, occupying force means that they have the first move. They will have to shift from focusing on isolation and self-preservation to one of empathy to the average Palestinian, an empathy that is so strong that they must be willing to take considerable personal risks and let up their stranglehold on Palestinian society and allow them to prosper.
Because only then will the environment be in any way conducive for Palestinians to take considerable personal risks and defy the status quo en masse. Only then will the false succor of violent religious extremism loose its appeal.
Until that happens, we'll the cycle seems to return to square one every two or three years and I expect to have this discussion again sometime around 2017.
Unfortunately, it is going to be a hard and unlikely road because it takes a lot of empathy and effort to rise up and take huge risks during the times of quiet when prosperity and security easily distract from the continuing plight of the Palestinians. These aren't common traits. Humans are a very tribal species and we're not good at this kind of stuff when it concerns someone different who you don't have to interact with. This challenge is hardly unique to the Jews.