The net is very flakey here. Any decent company has a T-1 line @ $1500/month. Otherwise you have to jump from ISP to ISP to find a decent connection. Once you find a decent ISP. next month his connection goes bad and you have to find another. The internet here is good for email and for reading the news- not much else.
Having been throughout the region and not having a religious or cultural bias (I am not jewish, arabic/muslim), your top choice in the region is Dubai in the UAE. Standard of living is on par with many major western cities and the network connections are fantastic. It's a very high-tech place in general. Israel has decent connections but terrible latency. Tel Aviv is a fun town though, no doubt about that. You can get away with stuff there you can't even think about doing in some of the neighbouring countries (though rural Israel is basically the same as any more-arabic country.) I recommend: Monday - Friday in Dubai, the weekend in Tel Aviv. As an aside, I'd like you guys to please refrain from characterising arabs in any general way. I am not arabic however I don't think racism is necessary here.