H-Town,
In Israel, DOs are treated as equals in every regard with all the other physicians there. Keep in mind that with the waves of Jewish immigrants that go there comes docs from all sorts of lands, so the country is filled with Israeli-trained physicians, as well as those from the US (MD and DO), Russia, the Ukraine, Romania, MBBCh's from Commonwealth nations, etc. There's not really much discrimination because there are so many sorts of medical backgrounds.
Keep in mind that Israel and Palestine are two seperate entities. You can't really emigrate to Israel unless you're Jewish and can prove it (the Law of Return), and I haven't a clue how you go about practicing in the West Bank or Gaza Strip.