I've been to Israel a lot and Egypt a couple of times, and I like both places, though Egypt, of course, is a lot poorer. The best way is not to stay in an inner-city hostel - get a guide with a decent car and stay in one of the hotels along the Nile. The National Museum (walking distance from most of the Nile hotels) is amazing in a number of ways -- it is a complete jumble, but some of the great treasures of humanity are stuffed away in there. Take a good 35 summilux for your M8, for the museum -- it's murky in there, and you'll need the fast lens to shoot through glass cases.
I wouldn't bother with the camel ride to the pyramids. Just drive up there; in fact, get the driver to take you on a long loop, and don't just look at the big ones. Get out and look at the Sphinx -- the feeling of age comes off it like off nothing else on earth. Probably make you feel a little sad, too.
Don't worry about how you look -- the Egyptians themselves look like everything. I'd stay away from the photographer's-vest, jeans and Nike look, though. If you look like an Israeli professor, you'll be all right (khakis, black leather shoes, button-up shirt, leather jacket.) And the wife should dress conservatively, and in dresses, rather than slacks. She might want to take along a couple of scarves. I wouldn't mention being Jewish, but you might want to take a quick look at the old synagogue...
About your camera. I'd go with few lenses -- a WATE, a 35, a 90 or 135, with a very small camera bag. The problem is, you'll have to take it almost everywhere with you. You can't leave it alone even in the best hotels, because the kit is worth many years' pay for most of the people who work there (it'd be worth stealing even at the cost of their job.) Frankly, if I were you, I'd get a Canon G9 and leave the Leica at home. Less weight and if it gets stolen, you're out about 1/4 of the cost of a single Leica lens. Egypt can be really dusty, and sand storms do occur -- there was one the last time I went, which I think was in February, and it looked like a London fog. In that sort of situation, a Leica would not exactly thrive. It's disappointing to leave your main camera at home, but if you're not specifically on a photo expedition, it's probably wiser.
JC