I imagine it would be wise to avoid using it on the street at least... a bunch of English blokes bellowing Yids will, I would have thought, offend at least a few Israelis.. but then again, I don't live there... maybe one of our Israeli members could help out?
My Sister who is out there on holiday at the moment (she lived there for 2 years when she was 18) reckons most have no idea what 'yid' means. Plus none of my Israeli cousins, uncles and aunts over there are aware if that word either! Only European Jews would know the true meaning as it's a yiddish term. If a group of English blokes were bellowing yids in Down Town Tel Aviv i doubt if many locals would understand what it meant let alone find it offensive....but like you say, maybe an Israeli member could help clear this up?