I don't think this is true, except insofar as "Waving a stick at Iran every now and again" is concerned.

You're almost in danger of deviating from neoliberal orthodoxy here.

I think @rayyy is right, unfortunately. If the West severs ties with Israel overnight (and suddenly stopping arms shipments would essentially be the same thing as severing ties), it'll just create a power vacuum where Russia or China will cosy up to Israel instead. Israel has a lot of influence in the region - partially because it's been propped up by US support, of course - and other countries would absolutely try to prop up Israel and capitalise on their influence in the US' place if they had the opportunity. Which would perhaps slow down the genocide for a little while, but it would inevitably pick back up, but this time without the US/West having any influence at all.

Not to mention the fact that the US losing its influence over Israel would almost certainly destabilise the region. Iran would be emboldened, as you alluded to. Hamas would be emboldened, and while I take the side of the Palestinian people in this whole ordeal, I don't think Hamas being emboldened would be a good idea - it would likely lead to further conflict and even worse suffering for the Palestinian people. Saudi Arabia, Egypt and Turkey would all likely try to expand their influences, too.

Biden is trying to slowly reel Israel in while still maintaining US influence there. Partially because the US just wants to keep its power, of course, but also because it's perhaps the best way to have some control over the genocide and over the region rather than just being an observer. I don't like all the blood on our collective hands but I think that, at this point, the genocide would continue without us.

I absolutely think the fact that Israel has been put in the position it's in represents decades of shortsightedness and foreign policy failure, though. Israel should never have been in the position to do this.