> Israel would probably be fine with a moderate government in Iran.

Maybe, but I think they are genuinely aiming for a failed state.

Israel is a state with a political apparatus that is predicated on providing security. That apparatus needs a persistent (but non-serious) threat to remain in power. I think best case for that power is to have a number of failed, weak states in the Middle East that occasionally launch relatively impotent attacks against Israel. This would also have the side effect of giving hard-line elements in Israel the enough justification to expand their borders and continue ethnic cleansing (e.g. what is happening in Lebanon right now).