Israel should not submit to an international investigation of the Gaza flotilla fiasco. It should conduct its own investigation. It should be a National Investigative Committee (ועדת חקירה ממלכתית), the highest, most independent sort of investigation, in which the government is the one who decides to establish it, but it is the chief justice of the Supreme Court who appoints its members. It can even have international observers, but the Israelis will be the ones conducting the investigation.
Investigations of lower stature are not enough. An investigation by the military won't have international credibility, and most importantly, wouldn't have the authority to look into the government ministers' decision-making process. A government-appointed committee wouldn't cut it either, unless it has exactly the same authority as a National Investigative Committee and its members can be trusted to be independent (this might be what happens in the end, if the law doesn't allow for a National Investigative Committee to have international observers).
It now seems that some cabinet members support a high-ranking investigation. Even Avigdor Lieberman is on board, so I'm pretty confident it won't be too long before the government decides to act.