Prisoners 'a priority'
Rula Amin, Al Jazeera's correspondent in Naqoura, said that Hezbollah had "put on a show for Nissir".
"Hezbollah officials here told us that they want to show that this is an achievement, both for the resistance and for Lebanon," she said.
The human remains handed over by Hezbollah to Israel are not those of two soldiers captured by Hezbollah in a 2006 cross-border raid, Amin said.
The raid sparked a fierce retaliation by the Israeli army against Hezbollah fighters in Lebanon in a 34-day war.
Nabil Qaook, Hezbollah's leader in southern Lebanon, said the organisation would continue to seek the release of Lebanese prisoners held in Israeli jails.
"The issue of prisoners is not only the top national responsibility, but it is also the ultimate ethical and humanitarian responsibility for us here in Lebanon," he said.
"As it was yesterday, the issue of prisoners will remain today and tomorrow the top priority of Hezbollah in Lebanon." Exchange deal
Nissir was arrested in 2002 and was subsequently sentenced to six years in prison for collaborating with Hezbollah.
|Nissir crossed into Lebanon after
serving a six-year term [EPA]
He has an Israeli Jewish mother and a Lebanese Muslim father and held Israeli citizenship at the time of his arrest.
He first joined his mother's family in Israel in 1982, during an Israeli invasion of Lebanon.
Nissir's brother Mohammed said Nassim told him in a phone call a month ago that "his jailers had placed him in solitary confinement in a bid to persuade him to abandon his plans to return to Lebanon with his two daughters, who are Israeli citizens".
Observers are mixed over whether Nissir's release can be seen as raising hopes for a broader prisoner exchange deal between Israel and Hezbollah.
Amin said speculation over a prisoner exchange had been fuelled by a recent statement made by Hezbollah's secretary-general.
"Hassan Nasrallah, the leader of Hezbollah, said [last week] that he hoped Lebanese prisoners [in Israel] would soon be released," Amin said.
"Many people are hoping that Nissir's release will be the beginning of a larger prisoner swap. From the speeches we heard here [in Naqoura]however, there was no such news."
Jacky Rowland, Al Jazeera's correspondent in Jerusalem, said that Israeli experts say they do not see a bigger exchange deal approaching.
"It would really be a coup for Hezbollah and increase Nasrallah's standing in the Arab world," she said.
"Clearly the Israeli government and indeed the Palestinian Authority in the West Bank are concerned about enhancing Nasrallah's standing in this way."
Israeli army radio reported on Monday that Israel was prepared to free five Lebanese prisoners and return the bodies of 10 Hezbollah fighters in exchange for the two Israeli soldiers.