Are you kidding? The whole idea of kidnapping vs killing is to use as a bargaining chip
I doubt they're bluffing but they most definitely have the incentive to
As to point one, yes, but first they'll lie about it for as long as possible. Especially now that this kidnapping had turned the world ever so slightly afainst them. Then they'll admit it... look at how cunning and manipulative the guy is... Totally trying to convince the public that he is they are the victims of israeli framing.
What incentive does Israel have?