As to hotels, notoriously expensive as throughout Israel, US$200 won't go very far. Among best bets might be The Olive Tree Hotel, The American Colony Hotel, The Dan Boutique Hotel.
For dining out:
Sakura (Japanese) 31 Jaffa Rd. (02) 623-5464. Daily 12:00-23:00. Nothing fancy in the decor but among the best and perhaps the most genuinely Japanese cuisine in the country. Sushi and sashimi, miso soup, cold noodle dishes, tepanyaki, teriyaki and sukiyaki style dishes. Moderate. ***
Dagim BaHatzer In the Feingold Courtyard, Rehov Jaffa 31. Sun-Thurs 12:00-24:00, Friday 12:00-16:00, Sat from close of Shabbat. Tucked into a charming courtyard, a fish restaurant with fine opening meze, excellent deep fried red mullets and fish falafels and, as main courses a variety of fresh water and salt water fish grilled or fried. Pleasant dining in an attractive setting. Moderate. Kosher. **
Dolphin Yam: 9 Ben Shetach St. (02) 623-2272. Daily 12:00-24:00. Nothing pretentious here but good fish and seafood specialties in a lovely setting. Good opening meze of nine salads and then coquilles St. Jacques with a white wine and sage sauce or fried calamaris. Reasonable-Moderate. **
Arcadia 10 Agrippas St. (02) 624-9138. Mon-Sat 12:30-15:00 and 19:00-23:30. A beautiful setting and often exquisite food make this one of the best restaurants in the country. Tradition and modernity come together very well in dishes such as the bass tartar, grouper with saffron sauce, goose liver with jam of baby eggplants. Expensive. ****
Canela 8 Shlomtzion HaMalcha St. (02) 622-2293. Sun-Thurs 12:00-17:00 and 19:00-24:00, Fri 12:00-17:00, Sat from close of Shabbat. Attractive, just formal enough with fine service and creative cuisine. Good openers include grilled eggplant on green tchina, sweet potato soup. Main courses iunclude gnocchi with green peas and excellent goose-leg confit. Moderate-Expensive. Kosher. ***
Cavalier 1 Ben Sira St.. (02) 624-2945. Daily 12:30-16:00 and 18:30-23:30. Pleasing atmosphere with a good wine list. Among my favorites: tuna sashimi, goose liver terrine, veal brains with lemon-butter sauce, coquilles St. Jacques with artichokes and nuts and beef fillet a la Troisgros. Moderate- Expensive. ***
Darna 3 Horkanus St. (02) 624-5406. Sun-Thurs 12:00-15:00 and 18:00-24:00, Sat night. Beautiful and authentic Moroccan setting. Pie with Cornish hen and almonds, lamb and lentil soup, lamb tagine with prunes, excellent couscous. Moderate-Expensive. Kosher. **
Philadelphia 9 Zahara St. (02) 628-9770 and 1 Shimon Hatzadik St. (02) 582-2472. Simple but good regional dishes in both branches of these popular Jerusalem restaurants. Good meze followed by kebabs, shishliks, lamb tagines, or grilled, herbed fish. Moderate. *
Sima 82 Agrippas St. (02) 623-3002. Sun-Thurs 10:00-01:00, Sat from 20:00. Most come to this ultimately simple Jerusalem landmark to feast on “Jerusalem grill” (chicken hearts and livers, bits of lamb all seasoned marvelously and fried with onion and garlic). Reasonable. Kosher. *
Shmil BaMa'abada 28 Derekh Hevron, Jerusalem. (02) 673-1629, Sun 18:00-24:00; Mon-Thurs 09:30-24:00; Fri afternoons and Sat from close of Shabbat -01:00. Set behind the old Jerusalem railroad station, charmingly re-done. Fine opening meze of labane, tabbouleh, pickled red peppers and zucchini. Don't miss the potato kreplach but also consider the eggplant pastry in casserole, and for dessert the platter of pastries. Reasonable-Moderate. Kosher. ***
For me, mid-week is always best in Jerusalem for everything is open during those days.