Nukes dropped on any part of Israel would kill Palestinians as well as Jews. To date, Nukes have been proven to be most useful as a deterrent. If Iran has nukes, then this would prevent the Israelis from using or seriously threatening to use their nukes.
Israel being a tiny country of 6 million and Iran being a rather large one with ten times the population gives Iran a major advantage. I don't see Iran as likely to actually invade Israel. They might supply weapons, they might use their nukes as a deterrent to the Israelis of using theirs.