They were also told repeatedly over radio that they were bombing an ally, and laughed in return.

I have no idea where you're getting this from. The Israelis received no transmissions, the Israelis didn't apparently contact the US Navy, and the Liberty couldn't even call a distress signal because her radio was damaged. If she had, the crew wouldn't have had to keep her afloat for 17 hours until rescue.

Israel didn't claim the Liberty was shelling nearby settlements, they claimed the Egyptians were, and claimed that the Liberty was Egyptian.