Thanks for all your responses.. Here's the update:
We went to misrad hapanim in maale adumim and they gave us a signed note saying that we should be able to use our American Passports to come and go and as soon as we get back we should renew the I PPs.
It costed NOTHING - we didn't even need updated photos.
We just saved 1100 shekels (that's how much it costs at the airport misrad hapanim.)
baruch Hashem.
But because it's Israel, give us an update AFTER you've finished with the airport. I hope it works as expected, but after all, you're talking about Israel