First of all, I would rather prefer India becomes self-sufficient in its defence need rather than depending on any other country. But at present living in a hostile neighbourhood particulary with China which has an opaque policy forming body, India will need all the help it can get.
And India-Israel "alliance" is a very strong and probably far fretched term. Yes there is a strong defence and intelligence partnership, particularly thanks to the help in the Kargil War with Pakistan and thesubsequent events after that. But most of the deals have still been transactional where India pays and buys from Israel rather than true co-development like say with the Russians on the 5th gen fighter jets.
Besides, for 2010 Israel moved to second place after the Russians in defence deals and would probably move to third with the US providing the same tech directly.
And Israel providing defence tech is not exclusive to India. Here is an older thread that details Israeli-Chinese defence relations
http://www.defence.pk/forums/china-defence/50362-israel-second-only-russia-providing-arms-china.html
And ofcourse, both trade and defence relationship has been bigger between China and Israel than India until most recently. And ofcourse Turkey-a muslim majority country-also has had a much longer and more extensive military relationship with Israel as well.
Both China and Turkey have put in more money in the Israeli economy than India has done.
And overall, GoI has a consistent specfic policy on the Israel-Palestine question. That final solution will be a two state solution for Israel and Palestine with East Jerusalem at its capital. India is not a major player in the peace process and in any case the US plays the leading if imperfect role which at present has no space for other countries. And as Indian's vote on the UNSC sesolution (vetoes by US)in favor of condemning the settlement expansions by Israel shows that India considers the occupation of West Bank and Gaza as illegal.
Here is a more credible survey done by WorldPublicOpinion.org on the Israel/Palestine question and you will see that India has both strong pro-palestine and pro-Israeli constituents. Although the ideal case would be that no side should be taken to have a fair settlement of the dispute.
International Poll: Most Publics--including Americans--Oppose Taking Sides in Israeli-Palestinian Conflict - World Public Opinion
Political Judaism or Zionism as an ideology will always cause issues in the long term as does any religious nationalist ideology and many Jews themselves oppose the ideology considering it unhealthy. Jews and Muslims are probably the closest when it comes to religious practices and Indian muslims hopefully can have a moderating affect on Israeli policies in the long term.
The Palestinian conflict is not just about Jews and Muslims though because there are many Christian Palestinians sufferring as well and until the 80s, the conflict was largely leftist and secular led by Yasser Arafat.
Maybe in the future India can play a role for peace between Israel and Palestine as it has good will of both countries. And the Palestinian PM had specifically asked India's role in the peace process.
But India should wait until a better government in Israel led by someone who is of stature like ex-Israeli PM Yitzhak Rabin comes to power. At present Israel is ruled by a coalition of right-wing and a loony right-wing party which makes talks of peace really difficult.