I don't see how Israel could respond better. If a rocket was launched from a rooftop, I think it is justified to surgically bomb that roof. Hamas is intentionally doing that to garner higher casualties, and therefore support. Hamas is lucky the US hasn't ever decided to step in and "help" defend Israel from the rockets.
That said, I totally agree that the settlements (especially the systematic takeover of water sources), treatment of Palestinians (blockades, cutting off supplies like food and concrete, etc..), and the general attitude of Israel toward a peaceful solution has been horrible.
But I don't fault a country for responding to being attacked. And I doubly don't fault the Israeli military for striking at spots that rockets were fired from earlier. Correct me if I'm wrong if that isn't what is happening.
I don't fault a country for responding when being attacked either. I do feel free to criticize the methods that they use though.
Instead of bombing the roof - or the entire area as likely, you send in ground troops that can actually determine what to kill and what not. The whole area is not big enough for civilians to have anywhere to hide. They're caught in between the proverbial rock and a hard place, with Hamas on one side and Israel on the other.
This is the way it could be done if Israel were willing to risk soldier's lives instead of killing civilians but Israel does not want to have their soldiers so instead they just blow up anything that moves in any area they're passing through, willingly incurring the civilian casualties instead of the military ones.
Civilians can't get far enough away to be safe - the whole zone just isn't large enough and there's nowhere to go that isn't being attacked. Israel was informed 17 times of the location of the UN school in the refugee camp and they still blew it up.
The US (apart from the typical willingly blind Jewish lobby) does not approve of the way that Israel is conducting this slaughter so don't think that they're about to come in and start blowing up more hospitals and schools. Not that Israel needs any help from the US for this.