Alright, but do you see this playing out positively for them longer term?

Israel hasn't been thinking of the longer term at least ever since Palestinians got internet access. That was the beginning of the end for their control over Western public opinion, (edit) and you'd have expected them to learn but nope.

Also I think there are probably going to be bad consequences internally assuming a non-insignificant part of the Israelis come to terms with the atrocity committed in their name.

Don't expect too much. To most Jewish Israelis (which are, let's face it, the only ones that matter) Palestinians are subhuman barbarians whose only purpose in life is to be killed for Lebensraum. And their share of the total population is going up, not down. So yeah, don't expect any soul searching in that department.