Some Responses
First time I have ever posted a reply, so hopefully this works.
Jerusalem - At the top end, I would add the David Citadel Hotel, though its been open for more than a decade and could use a refurbishment. Hopefully the opening of the Waldorf Astoria (taking bookings from August 2014) will force others to lift their game.
Ritz Carlton - Actually in Herzaliya, not Tel Aviv. 15-20 kms north of Tel Aviv. Seems to have just opened.
Tel Aviv - Hotel scene is pretty dismal. But a host of new boutique hotels have recently opened. Cannot really describe them as 5 star as they lack the standard facilities of 5 star hotels - pools, spas, ballrooms etc. But they have excellent rooms, food and service. I have stayed at both the Hotel Montefiore and the Rothschild Hotel (96 Rothschild) and would recommend both. The latter is now ranked #1 at Tripadvisor.
Dubai - No problems travelling to Dubai with Israeli stamps in your passport. I have done it several times. In fact I have travelled from Dubai/Abu Dhabi to Israel via Amman and had my bags checked through all the way to Tel Aviv. Likewise no problem with Egypt and Jordan, both have diplomatic relations with Israel. You should check for other countries.