Believe it or not, "honor" is very important over there. By killing Arafat, he becomes a martyer, but by making him look like a total loser is like dropping a bomb on him.
So Arafat plays the role of "victim" to distract from losing his honor in the eyes of his allies.
Isreal is making him look like a real waste of human flesh without killing him. If Isreal keeps it up, Arafats own people may end up taking him out.
How long will they keep their whoosie leader?