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Early in the year is good, because you can choose between ski-ing in the Golan and snorkeling in Eilat during the same vacation. The time to avoid is summer (especially in Tel Aviv because the humidity is high).
You can go for the beaches and clubs, but then why go to a country at the far end of the Mediterranean for that? The old city in Jerusalem is unique (have lunch at "Philadelphia") and the scenery around the Dead Sea is very special. Try to get to Haifa, Jaffa, Tiberias... there's lots to see.
In Tel Aviv itself, some of the cafes and bakeries in and on the edge of the Carmel market are good for trying mid-eastern food. Jaffa harbor is great - if you like sea food - for dinner. The glossier places, especially along Dizengof, are the safe choices food-wise, most of them pretty much like (semi) fast food anywhere.
It's good you will know someone there, because whatever you have in mind, places in Tel Aviv tend to be dotted around and you could miss them completely without someone to point you to them.
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