Israel, in another "confidence building measure" has agreed to free 170 Palestinian prisoners:Israel on Sunday approved the release of 170 Palestinian prisoners in a goodwill gesture toward Egypt and the new Palestinian leadership, officials said, but a Palestinian official dismissed the Israeli move as "cosmetic."
Note that the source is not a member of Hamas, but a "Palestinian official," (identified later in the article as "Radi Jaraie, the deputy Palestinian minister of prisoner affairs.")
Where did the idea originate that releasing prisoners was a "confidence building measure?" Here's one of the earliest references in the "Agreement on Gaza Strip and Jericho Area":

ARTICLE XX
CONFIDENCE BUILDING MEASURES With a view to creating a positive and supportive public atmosphere to accompany the implementation of this Agreement, and to establish a solid basis of mutual trust and good faith, both Parties agree to carry out confidence building measures as detailed herewith:

Upon the signing of this Agreement, Israel will release, or turn over, to the Palestinian Authority within a period of 5 weeks, about 5,000 Palestinian detainees and prisoners, residents of the West Bank and the Gaza Strip. Those released will be free to return to their homes anywhere in the West Bank or the Gaza Strip. Prisoners turned over to the Palestinian Authority shall be obliged to remain in the Gaza Strip or the Jericho Area for the remainder of their sentence.

After the signing of this Agreement, the two Parties shall continue to negotiate the release of additional Palestinian prisoners and detainees, building on agreed principles.

The implementation of the above measures will be subject to the fulfillment of the procedures determined by Israeli law for the release and transfer of detainees and prisoners.

With the assumption of Palestinian authority, the Palestinian side commits itself to solving the problem of those Palestinians who were in contact with the Israeli authorities. Until an agreed solution is found, the Palestinian side undertakes not to prosecute these Palestinians or to harm them in any way.

Palestinians from abroad whose entry into the Gaza Strip and the Jericho Area is approved pursuant to this Agreement, and to whom the provisions of this Article are applicable, will not be prosecuted for offenses committed prior to September 13, 1993.

There are some interesting aspects to these confidence building measures:
1) Israel's obligation is quite specific and was fulfilled.
2) The Palestinians never fulfilled even their ill defined obligation. Palestinians suspected (fairly or more likely not) of helping Israel were (and still are) regularly killed as "collaborators."
3) There was a limit on the amnesty. Violence against Israel prior to Sept 13, 1993 was to be forgiven by Israel. The implication is that this was a peace treaty and acts of war prior to the signing of the treaty were to be forgiven. Israel made a huge (and dandgerous) concession here allowing acts of terror to be construed as acts of war. Effectively this legalized Palestinian terror making it legitimate but even at that: the amnesty only applied prior to the signing of the original Oslo Accords. Any Palestinian engaging in terror subsequent to Sept 13, 1993 showed that he didn't accept the peace treaty and was therefore not elibible for amnesty.
Yet for the past 11 years the PA has insisted that Israel release all of its Palesinian prisoners even those who engaged in terror after the Oslo Accords. In this way the PA openly flouted its supposed acceptance of pursuing only a political solution; even after Oslo they sought to excuse terror against Israel in violation of their own commitments! (Charles Krauthammer once made this argument, but I haven't found it.)
Now Israel is once again proposing to release Palestinian prisoners, all of whom committed offenses subsequent to Sept 13, 1993. And once again the Palestinian minimize the significance of the proposal. A willful media ignores the precedent and allows the Palestinians to conflate terrorists with prisoners of war or political prisoners. If the gesture is to be minimized, Israel should reverse itself. If it builds no confidence why release men who will go back to committing terror? This isn't Hamas rejecting the significance Israel's actions but a member of the PA.
The NY Times has been very good at this sort approach. An editorial today "Timely Help for the Palestinians" states:

After the Palestinian elections set for Jan. 9, the new government must crack down on armed groups. Donors are also calling for Israel to remove scores of roadblocks and checkpoints. While those checkpoints have undoubtedly reduced the number of attacks by suicide bombers, they have made it virtually impossible for average Palestinians to move freely, whether going to the polls or simply trying to go to work.

Notice how Israel must allow "Palestinians to move freely" even a the cost of no longer reducing "the number of attacks (not just of) suicide bombers." And what does Israel get in return? An expectation of the Palestinians. And what happens if the Palestinian don't live up to their side of the bargain? Will the editors of the Times condemn them and say that Israel mustn't concede anything else until the Palestinian fulfill their obligaitions. Or will they insist on continued Israeli "confidence building measures" to convince the faithless Palestinians of Israel's serious intent? I would bet on the latter.
Consider for example a column from Thomas Friedman earlier this year. He criticized PM Sharon for not boosting Abu Mazen in his first incarnation as Palestinian PM by releasing prisoners. First he asserted:

While Mr. Sharon's decision is in the right direction, it's not all so simple. Why? Because in the past two years, Mr. Sharon has crushed Mr. Arafat's corrupt Palestinian Authority, but failed to lift a finger to empower more responsible Palestinians — like Mahmoud Abbas and Muhammad Dahlan

Then when he was called on it, and many pointed out that PM Sharon had indeed released prisoners to boost Abbas's image he wrote the next week:

My Feb. 5 column erred in saying Ariel Sharon had released no Palestinian prisoners to Mahmoud Abbas. He did. It was just too limited a release to have any impact. See above.

But as I noted back then:

First of all there was at least one "big name fighter" who was released. That was Ahmad Jabara, the "refrigerator bomber." Jabara was welcomed by many people in addition to Arafat and given a special title. The release may not have been enough for Abbas, but would any number have been? It's also wrong to claim that the release was too limited. This is from a contemporaneous account by The Media Line:

The Palestinian Authority [PA] regards this step of releasing prisoners as a positive one, since it will build trust on both sides. The PA also believes that such steps will put pressure on terror organizations such as Hamas and Islamic Jihad. This was reported on the Israeli news website Ynet, adding that the Palestinians claimed most of those released were ending their sentence in any case.

Crowds gathered to greet Jabara at the Qalandia checkpoint, from where Jabara headed straight for the Muqata’a, Arafat’s compound in Ramallah. Jabara was greeted by Chairman Arafat with open arms. The Palestinian Al-Hayyat reported Jabara’s release as the main item on its front page, alongside a picture of Arafat holding Jabara’s hand as a demonstration of strength and solidarity.

The release of Jabara was fron[t] page news in the official Palestinian press. That suggests that this was an excellent "confidence building" measure for those who believe that such things help. Instead of strengthening Abbas, Arafat got all the credit. For Friedman - as well as his editors - no Israeli concession is too great and no Palestinian obligation is too small. With such an orientation there will never be peace. Hopefully the Bush administration will show greater sense.
Crossposted on Israpundit and Soccer Dad.