Here are my recommendations for Hebrew musical cd's :There are a few exceptions- the OLD (not the new) Hebrew recording of My Fair Lady with Rivka Zohar (avoid the new one with Rita at all costs!)and a wonderful Hebrew musical (which would be hard to find on CD even in Israel) called Shlomo Hamelech ve Shlomi Hasandlar (Solomon the King and Shlomi the Cobbler). Of course you can also get Topol singing Fiddler in Hebrew (not my cup of tea). I don't personally recommend SE'AR (Hair) or Tslilei Hamusica (Sound of Music).
A really really fun Hebrew musical which did not have a cast recording is Mari Lu. It's a book musical which incorporates the songs of Tzvika Pik. It was savaged by the critics but was loved by audiences. I happenned to see it and was pleasantly surprised. The critics didn't get the book- which is a very funny adult satire on fairy tales (the heroine leaves her love in Israel and moves to LA with dreams of becoming a movie star and instead becomes a porno star and a prostitute) and also on the 70's in Israel. It also has a very funny and sweet gay subplot. The cast whose leads include a former model and a boy band singer were surprisingly good.
On another interesting note...Almost every well known musical has been done in Israel (from ShowBoat to Sweeney Todd) more than once. One musical that has never been done in Israel is Gypsy and I don't know why.
"It does what a musical is supposed to do; it takes you to another world. And it gives you a little tune to carry in your head. Something to take you away from the dreary horrors of the real world. A little something for when you're feeling blue. You know?"