Saying that a man "needs" to do what is good for him is meaningless - scientifically speaking, a man does not "need" to do anything, he can choose to do just the opposite.
Now, saying that a man always -does- whats good for him is also meaningless - this is more or less defining that any human action was "the best" choice for a man.
Things become meaningful when we actually have to decide what are the things that are "good" for us. is it eating the last loaf of bread in existance in order to survive a day longer then our "rival"? perhaps. I could certainly imagine, on the other hand, these last two human beings killing themselves in a noble manner rather then fighting for another day of torture. and in doing so, they will (by-definition) do whats good for them.
But what if there is more then a loaf of bread and an extra day of living torture, you may say? what if there is more on stake? again, men and nations act in various different ways, and they never "need" to do one thing or the other. some may try to keep all resources to themselves and watch the others dying slowly while believing this is "good" for them, while there are examples in history of men sharing resources and showing compassion and decency and a good heart. and for them, it is also the "good" way to act.
When will a person be "betraying" himself? where is this fine line? to one, it may be failing to fill the quota on the trains. to another, it would be to let a fellow human being suffer, or worse, make him suffer. I fail to see how you may so easily discern that one person lives in an illusionary world to the point of "betraying himself", and the other is practical and "knows" whats "good" for him.

Being born or thrown into a whirlwind of bloodshed and horror does not necessarily change everything. some may find it "good" to ruthlessly demolish the other side, others may may think that we are doing this unjustly, and that it is only worth fighting for things you -believe in-. why is it illusionary or impractical to choose to fight for one thing and not the other?

I would very much like to believe that I understood what you wrote - it is simply that I think it to be incorrect. speaking in an abstract manner (although I tried to carry on your example of the bread loaf) seemed natural, but this is far from being a "purely philosophical" issue. as a matter of fact, we do not even need to consider the complicated case of Israel and the palestinians.
Consider for example that you are to meet with a couple of friends from school, and when you get to the meeting point, you see them fighting with three other boys. at first, you may instinctively help your friends. but after a few minutes of fighting and evidently being the stronger side, wouldn't you be interested to know WHY exactly are we hitting these boys and get hurt ourselves? and would you still help your friends if you find out it all starts because your friends want to rape one of the boys' sister whom they find attractive (I am giving an extreme example on purpose)?
And what if you were there to begin with? what if your friends said amongst themselves "lets beat the crap out of these boys here, and rape the girl". would you help them out succeed in their goal because they are "your" group? I think I wouldn't.

Israel is a state and not a person, and so obviously does not try to rape anyone. however, is it so difficult to understand that some people think our state acts in an evil and unjust way?
This goes far beyond "understanding" the other side's point of view! sometimes in relationships between couples there exists situations where no one side is correct or incorrect, and unfortunately they both suffer from each other's actions. in these cases all you can call for your help is the sympathy and the compassion you have for the other person - try to see his point of view, suffer his own suffering, and so maybe change your behaviour not because you think it is morally wrong, but because you care for that other human being. this is obviously a course of action most people would not bother to take when the hurt person is someone they don't care for or sympathize with.

However, what I think Netanel was trying to say (and I think so myself to some degree) is not that the two sides are both right (and so we must mind our own suffering and not the other's, you may rightly insist). he claims that our actions are evil and unjust, that we try to wrongfully take what is not ours to take, and that we purposely cause harm to people who do not deserve it. he claims that it is not -decent-. he does not believe in it. in fact, he believes quite the opposite!

Why is it betraying oneself to refuse to fight for everything you hold unjust, refuse to cooperate and defend what you find to be malicious and wrong?