As for why Pakistan does not recognize the state, it is because
- It is believed that the state was created unfairly and dishonestly leaving the locals at a disadvantage
- It is believed that the treatment of Arabs under Israeli rule has been unfair
- The repeated assaults on Palestinian lands (Gaza and the West Bank) have created a humanitarian disaster for the people living there, Pakistan stands in solidarity with these people
- The expansionary policy of Israel, which includes building settlements on internationally accepted Palestinian lands is seen by Pakistan as an attempt to divide the natives of the land
- Growing India-Israel military ties is a big threat for Pakistan. And Pakistan feels insecure because of it, specially Missile defense system which India is getting through Israel, may result in neutralizing the Nuclear strike capacity of Pakistan, which is being taken as the life line for Pakistan. So going to have ties with someone who is friend of your mortal enemy is quite unnatural
- It is highly believed among the ruling class of Pakistan that in 1982 Israel planned a covert air raid, to neutralize the Nuclear program of Pakistan using the Indian air bases. But that plan was turned down by Indra Gandhi (The then Prime Minister of India), fearing the counter strike of Pakistan on Trombay (The Nuclear Plant of India), and also by the fear of backlash of US and China. (US was then completely aligned towards Pakistan because of its Anti USSR motives). But still this plan of Israel is being taken as a serious enemous motive of Israel towards Pakistan. And definitely a major dent in the thought processes of Pakistani’s towards Israel.
- Religious sentimental ties of Pakistani people attached to Palestine. (Although majority of the them don't know much about Palestine-Israel conflict, except that Israel has occupied Palestine land, and kills innocent people of Palestine and Lebanon).
- If Pakistan tries to tie with Israel, India would definitely oppose with its full capacity, as a fear of Israeli technology transfer to Pakistan and will pressurize Israel to not to do it, and in current scenario it seems difficult for Israel to set apart India for Pakistan.
Now let's come into present. Why do Pakistan still not recognize Israel. There's only one reason: how could do it when nothing has changed? Musharraf hinted on recognizing Israel as soon as Palestine and Israel reach any solution.