Well, as an Israeli, after reading this thread I hope that I won't eat a bucket of lead for trying to post here, and while I won't take sides on the issue of Israelis being terrorists or not I will try to shed some light on the situation here, so that hopefully everyone from both sides can be a little more informed.
The suspected perpetrators are a group of youths from the settlements who were on a trip in the area. This leave me without a doubt in my mind that the perpetrators are from the movement called the "Hilltop Youth". When you hear the media talking about right-wing Zionist youth doing "price tag" attempts, this is generally who they're referring too.
So, first of all: this was not a "price tag" attempt. If it were, it would be marked with grafitti specifically identifying who they were trying to "avenge". Rather, this was a hate crime attempt. The grafitti they left is in biblical Hebrew, so I can't translate it very accurately, but the word "idols" I can definitely see there. Which gives you a rough explanation for the motive here.
Now, back to the hilltop youth. They're a semi-organized (they're not an official group, rather a bunch of "lone-wolf" style teenagers, but they are generally in contact with each other and often coordinate attacks, alibis and legal defenses with each other) who, well, basically, fell through the cracks of the system. They were generally raised in religious, ultra-nationalist families of the "religious Zionist" movement. Because this movement is very fluid with the "Modern Orthodox" movement, you can find a very large and confusing number of views there. Most of them are just ordinary folk who like shouting at Arabs on their TV screens but are completely docile and peaceful besides that. The problem are the more "hardcore" folks, the ones who live in the "extremist" settlements. Which brings us to a second thing that most Westerners don't quite understand. There are different types of settlements. The majority of them are within the Fence, so most of the people living in them don't even know that they live in a settlement. They're just ordinary folk who could not care less about politics and don't even realize that, from the international point of view, they're being categorized as "settlers". Then you have a few "extremist" settlements that are what most international folk imagine the settlers to be. They're very extreme, right-wing, ultra-nationalist people living in outposts whose status under Israeli law is not very clear, much less under international law. These are the gun-toting guys burning down olive groves that you always hear about. Let's focus on the children here, the ones who "fell through the cracks" as I said earlier. They're educated in the Yeshivas located in these outpousts. These are very problematic Yeshivas, because they don't technically teach violent doctrine, so the government can't shut them down. But they raise the children in a very hostile environment that naturally leads to it.
Most of the students of these Yeshivas usually do some petty crime against Arabs during their teenage years - throwing rocks at cars, vandalizing olive groves, or stuff like that. The problem is that, the youth laws in Israel are not very strict (slaps on the wrist mostly) and because they're Israeli citizens, they're prosecuted under Israeli civil law, not the military law that Palestinians get prosecuted under. So essentially, from a legal perspective, they're no different from drunk teenagers throwing rocks at cars or spray-painting grafitti in the middle of Tel Aviv. So they get a slap on the wrist, get released, and go back to their settlements. But because with these guys, it's not a discipline issue but a radicalization issue, this does absolutely nothing at all to stop them.
Then you have the army. Israel has mandatory army service. This is sort of the "grow-up" phase for Israelis. They go in as typical partying, alcoholic high-schoolers, get that knocked out of them in boot camp and the strict army discipline, and then get released as much more mature, productive citizens. This is why, for instance, you won't find frat boys throwing massive parties in Israeli colleges - they all got it knocked out of them in the army. But these youth, the ones we were just talking about, don't get drafted, because the army realizes just how dangerous they are. So they miss that grow-up phase that's supposed to transform them, and go into adulthold keeping the mindset of the invincible teenager. This is where they fall through the cracks - with radicalization at home, and no one there to stomp some discipline into them, they get released into the adult world essentially as undisciplined, radicalized teenagers.
So they do exactly what you'd expect them to do - mostly vandalizing mosques, burning down olive groves, and etc. For them, it's just normal teenaged "fun", with a sick, hateful twist to it. Then they get caught, but because this is, again, Israeli civil law, they can't be persecuted as terrorists, even if it was a terrorist attack. They just get the standard misdeamenor charges for graffiting a building or something like that. And here's where the big problem starts. There are a number of right-wing NGOs who provide legal help for people arrested in right-wing attacks. When these kids get arrested, they get educated extremely well by them. What to say and what not to say during interrogations, all the legal loopholes that are so prevalant in Israeli law regarding settlers and hate crimes, the different degrees of crime and how they're legally categorized by severity and by nature (hate crime, etc.). So they spend their week in jail for a petty misdemeanor, but come out with enough legal knowledge to become lawyers themselves. And then they go and share this with their friends, and soon the entire group knows how to ride the legal system extremely well. And then they share this knowledge with other groups of friends, and in this way the entire hilltop youth movement got educated.
Because of this, it's now extremely difficult to prosecute them when they're caught. When they commit the crime, they know exactly the kind of alibi to cook up to get the police off their tracks. They know exactly what to do to avoid leaving forensic evidence, and to make sure that if they are caught, the crime can only be classified as being of the most minor, petty degree possible. And when they do get caught, they know exactly what to say in their interrogations, exactly what to say in the courtrooms, how to work the legal loopholes like experts. And again, because this is Israeli civil law and not military law, they're provided with much more legal benefits than those prosecuted under military law.
This is where the big problem starts. Because the military law has been dealing with terrorists for decades, it's become very clear-cut on what constitutes a terrorist attack, and most of the Arab terrorists have zero legal education, confessing to their crimes within two seconds, making it very easy to simply capture them and then lock them up for life. The Israeli civil law, on the other hand, being very unused to dealing with these thing, still has a lot of grey areas regarding hate crimes and terrorism, which lawyers can often very easily exploit, and since the perpetrators are often extremely well-versed in police techniques and avoiding and exploiting the pitfalls of the legal system, they become extremely problematic to prosecute. That's why you almost never hear about these people getting any harsh sentences, and why it's so easy to commit these crimes.
Now that I've explained the situation a bit, I'll address the issue at hand, of this particular Church arson. As a Christian, I find it horrific. And the majority of my family and friends agree (although they're more of the "common folk" type, so I have no idea how a problematic settler or an extreme leftist might view them). Most Israelis hate and despise these people who do things like this. The reason I wrote out all the above, is to show that it's not just an issue of Jews vs. Arabs like most people think, with the Jews getting off the hook while Arabs get killed. It's a very complex problem, both a social and legal problem, that needs to be felt with. As for why it's not being dealt with, it's, and I hate to say this, just not a very high priority for most Israelis. Your average Joe living in Tel Aviv simply does not care that much about the latest clashes in the West Bank. When the bombings and rockets are hitting Tel Aviv, that's a whole other story. But when it's a mosque in the West Bank getting spray-painted, or a Church in rural Galilee getting torched, or the army tear-gassing settlers while trying to evacuate an illegal outpost in Samaria, it just doesn't affect the average Israeli couch potato that much. We've got a lot of very pressing economic issues in the country, a lot of very controversial social issues, those are the things that your average Israeli will bring up if you try talking politics with him. If you talk to him about the West Bank and clashes there "well, at least no one got shot today" is probably the answer. Everyone's used to the back-and-forth in the West Bank and Gaza, it's routine. Things like this just aren't what people think about when they vote for their elected officials.
Again, I'm not going to take a stance on the whole "Israelis/Arabs are the real terrorists here" debate, because that will just lead to more division and strife and infighting in this thread which is the last thing that we, as a Christian forum, should have. But hopefully I've managed to give anyone reading this a glance into the smaller details here, so he can understand the situation better.