It's more complicated than that. For one thing Ukraine is also an EBU member. And even then Russia was initially still allowed to compete until 9 other member states complained and threatened to boycott the contest. And even then Russia only received a temporary suspension.

That they are currently still banned is not directly because of the war. Rather it's because the Russian broadcaster lost it's editorial independence. The EBU is not just the organisation that organises the ESC. They are also a lobbying organisation for public service broadcasters. Direct control by the governments (a.k.a. state tv) is not allowed. And that's precisely what Russian TV became. Or that's the story the EBU wants you to believe. Because we all know that they would have found a way to make the suspension permanent even if the broadcaster remained (relatively) independent.

Israel on the other hand is only boycotted by five countries. There is no consensus among the European public regarding its actions. Some countries, most notably Germany, are very supportive of the country.

Lastly KAN the Israeli broadcaster is still at least nominally independent. In fact they are a thorn in the side of the government. Not on Gaza, there they agree pretty much with them, but on Netanjahus general corruption. The government therefore wants to shut them down and replace the tv channel with a mouthpiece, but such a network wouldn't be eligible any more (see Russia). The EBU is trading in the ESCs relevance and trust to protect a member broadcaster.

That being said Israel should absolutely be suspended. A irrelevant contest doesn't protect anyone and the Israeli government manages to do enough damage as is with the limited influence that they currently have.