As far as osm wiki tells us, nominatim DOES pay attention to “is_in”.

Plus in the future this should be handled by relations, such as http://wiki.openstreetmap.org/wiki/Relations/Proposed/Is_In

@mikel, what about the guy who asked you the original question, do you know how would he prefer to see the location of the Western Wall? Freely discuss mapping, hah? We know what this means.