Why the Arabs hate Israel is a complex question, but one that needs to be explored. I have come to certain conclusions, and the primary one is that the Arabs hate Israel for one reason more than any other: pride.
You see, Israel is a sore in the Arab's side. It is the West in the mideast. By the 20th century, the once glorious Arab nations were under the thumb of European imperialism. Britain and France ruled them, dominated them, and shamed them with their military and economic superiority.
Unlike India, the Arab nations did not "win" their independence (by passive resistance and nonviolence, might I add). They remain shamed. But unlike Africa, they were not powerless, they had the lifeblood of modern industry - oil. Lawrence of Arabia was European.
Israel, however, is a constant reminder of the West's dominance over the Arab states. Israel is a tiny country, a country of JEWS, no less (not exactly known for their fighting prowess), that consistently defeated much larger Arab forces - of multiple nations, not 1-on-1. Israel has a modern economy, unlike the rest of the mideast. It developed the Nuclear bomb. It survived without their oil. It survived with a democracy, as opposed to a paternalistic dictatorship. Israel is a leader in science and technology. It made the desert bloom. It survived all the ways (economic, political pressure through Europe, terrorism) that the Arab nations tried to destroy it with.
And that is a reminder to the Arab people of what they HAVE NOT done. It is a constant reminder of their failures.
And that is why there can be no real peace until the Arab nations are themselves reformed into modern democracies. Because until they have pride in themselves, the only source of their pride will be the hope that Israel will eventually be destroyed.