Having your embassy in a different city from everyone else's would be just plain daft. But in any case, Jerusalem will never be the capital of anywhere, except perhaps of itself. The final status agreement will put the Palestinian capital at Ramallah, and the Israeli capital at Tel Aviv, with Jerusalem as an undivided city under some kind of UN authority, as if it had not already suffered enough. Thus would it be everyone's, and thus in turn would it be no one's, with untrammelled access to all of the holy sites for anyone who wanted to visit them.
For yes, Jerusalem is, among other things, "the eternal capital of the Jewish people". But there is no argument that it ought therefore to be the capital of the modern State of Israel. To suggest so would amount to the greatest annexation of them all, the annexation of every Jew in the world, past, present and future. But just as one fifth of Israeli citizens are not Jewish, predominating in half of the territory within the pre-1967 borders and growing at a very high rate, so well under half of the world's Jews are Israeli. And that is before counting the Jews who died before 1948, and who were very much part of the eternal Jewish people.
Good point that Israeli and 'Jewish capital' can be in different places. Jerusalem could become a sort of Free City, under UN Israeli Palestinian control respecting the pre1967 boundaries. Israel govt buildings could be converted to hotels to accommodate all the tourists.
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