Einstein was a very charismatic figure, the prototype of the "good" scientist. He was hated by right-wingers for his liberal views, even among jews. I believe he would have given Israel a different direction, and not necessarily a bad one. His pacifism would not have gone very far, though.
An even bigger influence he might have had on the Arabs: Being the head of Israel (at least ceremoniously) might have made it impossible for an Arab to voice opinions similar to his. So the Arab world might be even more hostile towards liberal believes, democracy, scientists, jews, and so on, which might lead to more fundamentalism at an earlier time there.