Back in the 1980s, when Jonathan Pollard was convicted of espionage, I happened to have a lot of contacts in the US intelligence community who dealt with the Middle East. While they never shared classified details, everyone from Defense Secretary Casper Weinberger on down was appalled by the magnitude of the security breach. Israelis and others claim that his life sentence is excessive for a US citizen. Perhaps, but the judge had access to classified data we don't, and the law permits stiff sentences if the betrayal led to loss of life (not known to be a factor in this case) or if "nuclear weaponry [...] war plans; communications intelligence or cryptographic information" were involved. While I have no direct knowledge, several American and one or two Israeli sources have suggested to me through the years that all of those areas were compromised,and that several US allies in the Arab world had secure information passed along. Weinberger opposed any leniency towards Pollard as long as he lived, When Bill Clinton considered trading Pollard for peace concessions in the '90s, the CIA Director George Tenet threatened to resign. Some in the US intelligence community think Pollard's massive leaks were the biggest security breach between the nuclear secrets cases in the 40s and 50s, and Aldrich Ames, whose betrayal led to a number of executions in the Soviet union/Russia. Israel may be an ally, but you don't tell even your allies your deepest secrets.
At the time of his espionage, Pollard was a US citizen only, not a dual national. Only in the 1990s did Israel grant him citizenship and begin agitating for his release.
Pollard will be eligible for early release in a year or two, I believe, and that is an issue for the courts. But the current talk about releasing him in exchange for concessions in the Israel-Palestinian peace process strikes me as odd indeed. What has one thing got to do with the other? Spies are usually exchanged for spies, and if Israel is sincere about making progress with the Palestinians, what does Pollard have to do with it? It's mixing apples and oranges, demanding John Kerry make a concession on a bilateral US-Israeli issue in order to achieve progress between Israel end the PA. (And once you give up Pollard, how do you assure those concessions persevere? How do you know there won't be more demands?)
I believe, without having any direct knowledge, that some in the US intelligence community fear that Pollard still has sensitive information which could, even quarter century later, be harmful to US interests if divulged. Trade spies for spies, not for evanescent negotiating concessions. The man egregiously betrayed his oath, his trust, and his country, and was convicted in a court of law. He's not a hero.