I've met more then alot of arabs and Israelis.
Some of Israelis do look arabic, and some, if not alot, look like they came straight from England or some european country.
Most arabs do look arabic, though I have met a couple who did not.
As for the whole "who is ugly" thing, thats just a matter of someones personal taste.
Never the less, the average layperson should generally be able to tell the differance between someone of arabic decent and someone who is jewish.
Going with the greater numbers, there are more jews who look european then look arabic, while there are more arabs who look arabic then look european.
Arabs aren't a monolith either...
From what I understand, a Gulf Arab looks nothing like a Lebanese Arab, or a Syrian.
I agree beauty is in the eye of the beholder, but to me it's like a Honduran saying Guatemalans are ugly...when they look quite similar to each other.