And they should every single time. Destroying the rocket launcher that fires on your civilians isn't an over reaction. It is the job of a nations army.
Do you understand the concept of a rocket barrage? There is something about odds in there but I'll leave you to figure how that works.
Katyushas, as I understand it, are area affect weapons. Originally built by the Russian military, these sorts of rockets were only accurate to within about a kilometer. The idea was to launch hundreds simultaneously and blanket an area. Given the number of rockets launched at a particular area, the margin of error was irrelevant.
Hezbollah possesses somewhere between 6,000 and 12,000 of these rockets, discounting for the ones used up in the recent war. Their principal advantage for Hezbollah is that they are highly mobile weapons, and can be moved and launched easily.
This makes them almost impossible to track and destroy. They're launched, the site is then abandoned, and Israel bombs an empty target uselessly. Or Israel bombs a bunch of civilians. Israel is well aware that the site will likely be abandoned by the time they get a response there. So they are, equally, well aware that they're both bombing uselessly and bombing civilians.
Why does Israel do this? A couple of reasons. First, it may well be a form of punishment. Israel can't hit Hezbollah, so they punish the civilians. Or it may simply be political, the need to have a response, even if it is useless and counterproductive.
The downside is that they're not particularly accurate, and of minimal effectiveness when used in small numbers of ones and twos. Its relatively easy to target an urban area, but the odds are long that it will actually hit anything important. Of course, Hezbollah lacks the sort of highly detailed target information that would be effective. The effect is more psychological than effective.
Hezbollah also apparently possesses a stockpile of more accurate, more powerful weapons. Some capable of hitting with relative accuracy far into Israel. This stockpile is much smaller, these rockets are far more expensive, more powerful, but more vulnerable to interdiction.
One of Israel's objectives in the 2006 war was to destroy Hezbollahs formidable missile capacity. It failed utterly.
As for Hezbollah, although the Katyushas are of limited practical use, there are a couple of significant effective purposes.
First, the Katyushas, used occasionally and in tit for tat response, make a point. The border is fraught with conflict of the 'he started it, variety.'
Second, in the event of full scale conflict, as in 2006, the Katyushas are used to screen the real hitters, the heavy long range accurate missiles with significant payloads. Fifty or a Hundred Katyushas would be launched in a day, Israel would attempt to respond to all of them. Mixed in would be a couple of the real hitters.
There's no real stopping a missile, of course. But you can use radar to track back to the launch point and blow it up. Not terribly useful if the site is already abandoned. But the heavier, real hitters are not as easy to move or abandon, and they're potentially easier to find in advance. A screen of Katyushas, is essentially like Hezbollah throwing a cloud of biting flies, with a few hornets hidden in the group.
Of course, Hezbollah couldn't send enough missiles to do real military harm or strategic harm to Israel.
But the battle was psychological. Hezbollah demonstrated and kept on demonstrating that it could hit Israel on a relatively massive basis with impunity, and keep on hitting Israel again and again, and that the IDF forces could not stop it. In this sense, Hezbollah won. Even on the final days of the war, it could still keep launching dozens of Katyushas, and by all evaluations, the bulk of Hezbollahs stockpile was intact.
The implication is that, all other things being the same, a new war or renewed war would turn out the same.