Absolutely they should give up their only bargaining chip. That will leave them in a stronger position, obviously, as they will be literally decimated -but- they can then complain about how ruthlessly they were destroyed. I'm sure the arbiter will just put everything back as it was before any of this mess even happened.

Especially since the arbiter is one Donald J. Trump, a Colossus of a man with an immaculate reputation for fairness, and a knack for both resurrecting eradicated families and magically repairing destroyed infrastructure with a flick of his wand. Yes, release the hostages unconditionally, I'm sure it'll just work out for you if you, I dunno, pray hard enough. (But not like that, though. We don't recognise that kind of prayer)

And reward Israel for violating the ceasefire?

Since Israel and the collective Western civilization do not appear to posses any morality, those prisoners are the only leverage Hamas has. They would be crazy to give it up for free.

Israelis are protesting to get their prisoners back, not because they want to end the genocide and care about Palestinians. Plenty if polls have proven this.