"In my opinion, it is in Israel's interests, to improve the situation of the Palestinian people."
There is a long history of the Jews doing just that, both before and after Israel was a state. It's mostly ignored by Israel's critics, however.
"And it would make the Palestinian people less likely to harbour feelings of hatred against Israel. "
I am not an Israeli, but as near as I can make out the hatred isn't necessarily personal, but both tribal and religious. Tribal: An Israeli Jew can be friends with a Palestinian Arab, but when the Arab's chief tells him to slay his Jewish friend he will do so. (They treat other Arabs in much the same way.) Arabs will kill the Israeli doctors who save their children's lives for the same reason. On the other hand, if an Arab doctor messes up treating an Arab's wife, the aggrieved husband may seek to kill the doctor, purely on his own initiative. Religious: Since Muslims once ruled it, some Muslims claim all of Palestine as land to be subject to their rule where non-Muslims should be merely tolerated. (These Muslims seek to re-conquer Spain for the same reason.)