If you read the Law of Return which defines who is a Jew and who is entitled to privileged rights as citizens over all "others", it most definitely refers to Jews as a "religion" which it is and the definition of being Jewish is through Jewish religous law. It has nothing to do with where one originated from or their descendants. Therefore, the State of Israel most certainly does insult Judiaism and surprisingly, this is for the most part accepted. In essence, if this was a state where it specifically defined Jews in order to undermine their rights as being unequal with others, there would be a cry of outrage throughout the world. And a state doing so by any other name than that of Israel would be called "anti-semitic."
Munich council upholds ban on Holocaust 'stumbling stone' memorials (AP)
from the article: O to have been born a Jew