(BTW, Isildur, I think you meant that Israel shelled and invaded Gaza; there hasn't been anything going on in the West Bank.)
Iran's the real worry point here. They've been dropping broad hints that they'd love to finish the job that Hitler started. Getting to Israel directly is suicide--they'd have to come over American and Iraqi forces in Iraq, then Jordan, who isn't going to sit there. The Arabs despise the Persian Iranians in general, no matter the religious similarities; there's few things that would unite Iraq quicker than an Iranian invasion. However, Iran could send a few missiles Israel's way, and if Iran has a nuke...that would be very bad for all parties involved, because Israel will retailiate. Assuming they don't launch a preemptive strike. That whole scenario is nightmarish.
I just want to point out to those who are new to the whole situation:
It's generally accepted in the intellgence community that Israel has nuclear weapons and has had them for some time; they've just never been stupid enough to test them and make it an issue to the countries around them, but conservative estimates give them an arsenal of about 30 devices, most being air deployed bombs, and a few smaller devices that could be integrated into missiles.
If Israel decided "**** it, they're going down", they have the firepower to make one, possibly two of their closest enemies disappear altogether, or leave Iran or Syria largely defenseless.
I believe, regarding my own questions:
Israel is in the right to be aggressively defending it's borders and preemptively striking it's opponents in retaliation for the kidnappings, which effectively amount to an act of war. It's not that the lives of those 3 soldiers are worth thousands of civilian dead... it's the principle of it, that having ANY of your population taken from your country by enemy combatants is an act of war.
But I think Israel is banking on America and the UN jumping in. Israel can fight a multi-front war... their army is larger then some European ones, and their hardware is identical to ours, or in a few cases better then ours (the Merkava mk IV is generally superior to the M1A2-SEP). But they can't win if they start taking deep loses because their reservers are limited and they have very few aces up their sleeves other then their allies and their nuclear stockpiles.
Should America jump in?
Tough to say. America is arguably already in a 3 front war. Iraq itself is a nightmarish situation to begin with. The people we're trying to disarm live among the people we're trying to protect, so every fight is a disaster. Afghanistan isn't much better, save that there isn't as much to protect in the first place.
The main concern is North Korea and Iran. The USA cannot take on both at once, and fighting either today would push our military beyond it's current capacities. The key problem is that both are wolves right now. If Amercia became entangled with Iran, North Korea would become more aggressive against South Korea and Japan. If America goes after North Korea, Iran would move against Israel. In either case, even with European, Chinese, or even in the worst case, Japanese help (more on this later), America would be left with just nuclear deterent to stop the fighting.
The last thing the world needs is for North Korea to pull Japan into conflict again. Already there are rumblings of nationalism in Tokyo and if North Korea goes to far then the pacifistic constitution of Japan is going to disappear and the Rising Sun is going rearm. Which from a world power perspective is bad because traditionally what happens in that case is eventually war with China. The worst case scenario would be North Korea attacks South Korea, then attacks Japan, Japan retaliates, rearms, and jumps in, and then out of nowhere Hong Kong and Taiwan go against China and Japan jumps in with them. The result would likely be nuclear strikes by China, precipating Defcon 1 and nuclear war between America and China, which we can win but at that point the difference between winning and losing really doesn't matter that much.