What does the OT mean by the moniker 'Israel' in any case? Sometimes it's the North only, other times it's both North and South, and at times it's only the South. And then of course at numerous times it is commodius, and includes people entirely outside the North and South altogether, as in the 'sojourner'. On this last example, there is the matter of the 'catholicity' of Israel, and thus the inclusion of those who are not 'Israelite' but who are part of 'Israel' nonetheless by association (similar to the status of the others on the ark as "saved" because they were "with" Noah, or those whose blessing depends on their standing relative to Abraham)
Perhaps the basic theological issue at stake in this disagreement has been more clearly formulated by R. Gordis: 'It is fundamental to the Jewish world-outlook that the preservation of the Jewish people is itself a religious obligation of the first magnitude' (Megillat, 13). In my judgment, Gordis' assertion holds true for Christian theology if kept within the critical guidelines which have been fixed by the canonical context of Esther.
On the one hand, the book of Esther provides the strongest canonical warrant in the whole Old Testament for the religious significance of the Jewish people in an ethnic sense. The inclusion of Esther within the Christian canon serves as a check against all attempts to spiritualize the concept of Israel - usually by misinterpreting Paul - and thus removing the ultimate scandal of biblical particularity. On the other hand, the canonical shape of of Esther has built into the fabric of the book a theological criticism of all forms of Jewish nationalism which occurs whenever 'Jewishness' is divorced from the sacred traditions which constitute the grounds of Israel's existence under God (Introduction to the Old Testament as Scripture, 606-607).