Eagle2009,
I have several points about the C802 and the Lebanon War 2006.
1. Three C802 were used during the war. Two were shot at Hanit. One hit it. The other was hitting a trade ship 60 km away. The third missile was shot close to beirut at a Sa'ar 4.5 that was near Tyre some 100 km away. Israel denied this, however reporters and Hezbollah confirmed the ship being hit. The radar showed other ships were heading to help it. A fourth small patrol boat was sunk using a Kornet missile most probably. There is a video about this.
2. Prior to the hit, the Hanit was around 10-15 km away from the shore. At these distances its not possible to talk about small RCS and stealth. The RCS becomes an important factor at longer distances. You have a gain at the radar receiver by d^4. So at these short distances its possible to detect the ship. During the day it was possible to see it with normal binoculars as i used to do. I also dont believe that the countermeasures of the ship were at standby as Israel claims. They were simply too close.
3. Fact is, the missile hit the crane and the deck. However I cannt really say that it was homing specifically on the crane. Would be the best missile ever if it can detect the crane, home on it and hit it from a 10 km distance

. Thats too much precision i guess. I am also not sure (i dont know) if such a small target as the crane would be resolved by the missile radar. This also doesn't mean that if the crane was not there the missile would have not found the ship.
Now having wikipedia as a reference:
4. The missile in the end phase switches its own radar. This means that it will be looking at the ship from the top from close distances. The ship is by no means stealth from these angles.
5. According to wikipedia too, "
When approaching the target, the missile dives to hit the waterline of the ship to inflict maximum damage". I also expect an anti ship missile to do so. But I think this stage didn't work well. Thats why we had the hit on the deck. Or maybe the missiles produced by Iran are not programmed to do so? different versions?
6. Its right that the Hanit didn't sink. but the damage was not small as you mentioned. Israel tried to downplay the damage and even said that the ship was repaired in one month. However it took some (5-6) months before it was displayed and entered service in a ceremony. The commander of the Israeli navy talked about ordering the ship to return with its own power. The ship actually needed help and was accompanied by other ships... but its a matter of pride for those people... he said he insisted that it gets back with its power... anyway.. he was fired after that.