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In truth it goes beyond Netanyahu. There are a painfully large number of core divisions within Israel -- between hawks and doves (though that one's become pretty imbalanced), between secular and religious, somewhat still between Ashkenazi and Mizrahi/Sephardi Jews. But for these purposes, they overlap in another divide between those who see Israel and actually Jewry writ large as living in a fundamentally hostile world in which safety and security is only in their hands.
That's 'everyone is against us'. And it's powerful because it's got a vast storehouse of history behind it. This overlaps, albeit very imperfectly with the religious/secular divide, the Israel of Jerusalem versus the Israel of Tel Aviv. In some way it is the mentality that allowed the ben Gurion generation to bring Israel improbably into existence (though I would argue -- and I like to discuss in greater detail at another point -- that it was then much more in tune with and appropriate to the reality of the moment). Then there's the other Israel, the other Jewry too, that recognizes enemies but sees Israel as not only a strong country in itself (which is undeniable) but one with powerful friends and vibrant economic ties -- based on some of the most dynamic parts of the global economy.
This is why, to me, the precise circumstances of the raid on this flotilla aren't really the issue. It seems to me murkier than a lot of the accounts suggest. But again, that's not the point. The whole policy that it is a part of is simply flawed and deeply damaging to Israel's security, just as the continuation of the occupation itself is the biggest threat to Israel's security, bigger even than an Iranian bomb, I would say.
This is the strategic decision that Livni's Kadima party has made -- that Israel's security is threatened fundamentally by the occupation and the mounting international isolation that it brings in its wake. (It's in some ways also the decision Labor has made, though they've perhaps unmade it contingently to be part of Netanyahu's coalition.) Getting caught up on the details of this raid misses the point. It's simply part of this larger story. Netanyahu's policies are on their way to creating the world he imagines to be living in. It's very sad for all involved.