I guess Hamas thought Israel was joking.

Well guess what?  they weren't.  And Israel looks ready to knock Hamas's doghouse down.  Did Hamas think the idea that they're supposed to be a legitimate government was enough to deter any kind of retaliation from Israel?

Right.

This is the proper response in dealing with Hamas.  Had Israel not responded with military action, I can guarantee you that these kind of kidnappings would have happened with more frequency in the future. 

Now, with the increasing military presence in Gaza, Israel puts the ball in Hamas's court:  Either return the solider unharmed or all hell will break loose.  If Israel stands their ground, I bet Hamas or any other two-bit group will think twice before they pull this stunt again.