Sixty years ago, when Egypt occupied Gaza, it refused to grant the local Arab residents, native Gazans and refugees from the Arab-Israeli war of 1947-48, citizenship. Instead, the Egyptian government intentionally cut them off from Egypt and kept them impoverished, so they could be used as a propaganda and military weapon against Israel. When Israel took over Gaza in 1967, it opened the border with Israel, providing tens of thousands of jobs for Gazans, and increasing the standard of living there dramatically, albeit from very low levels. After a wave of suicide attacks from Gaza, Israel gradually closed off the border with Israel, and finally closed it off entirely when Hamas took over last year. Meanwhile, Israel no longer occupies Gaza, and the population has sunken back into abject poverty.
With the Gazan's breach of the border with Egypt, and Egypt's refusal to use force to seal the border, things have come full circle. It's time to ask why Egypt, with 80 million people, can't grant Gaza's one million full Egyptian citizenship, and allow them to live in Sinai or even Cairo instead of being stuck in Gaza.
No matter what happens in the near future between the Palestinians and Israel, I doubt Israel will ever allow the reasonably free movement between Gaza and Israel that existed through the early 1990s. Giving the Gazans Egyptian citizenship, and making Egypt responsible for security in the area, would benefit Israel, the Gazans, and even Egypt itself, by destroying Hamas's base (Hamas being affiliated with Egypt's anti-government Muslim Brotherhood). It would also benefit the Palestinians in the West Bank, by allowing the more moderate residents there to reach an accommodation with Israel, perhaps in concert with Jordan.
If Israeli leaders had any p.r. sense and/or vision, they would use this opportunity to loudly ask why Egypt, which refused custody of Gaza when Israel returned the Sinai, is so adamant about refusing to do its part to relieve Palestinian suffering.