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Israel trip budget ...what things will cost?

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I am at the early stages in planning a family trip to Israel for early June 2011. We are a family of 4, kids are older, 20 and 22. We were thinking of going the private guide route, but I'm concerned that the price will be prohibitive. We are hoping to go with another (which also is dependent on cost). We are thinking of 9 nights.

I have been emailing some recommended guides (from here and personal recs). Based on the info I've recieved here are the estimated costs:
Guide - $600-950 per day. includes transportation, guide and driver services.
Guide overnights - $400 total (this figure came from one of the guides i emailed)
Sight seeing and activities - $200-$250/day/person ** this seems high to me but came from one of the guides I emailed???
Hotel - would go mid-range, more or less equivalent to Europe 3*. I'm hoping we can keep it under $250/night/room
Food - $150/day for a family of 4 (no fancy meals)
Airfare (RT from NYC) - $1,200/person

If we were to split the guide fees with another family I see our family cost being:
guide (incl overnights)- $3,000 - 4,500
sightseeing (assuming 1st and last day we wont be doing much): $7,000-10,000 (I'm, hoping that the quoted figure above is wrong, because this seems out of line)
hotels - $4,000-5,000 (for 2 rooms for 1 family)
airfare - $4,000-5,000
food - $1,500

So total price for family of 4 can be from $20,000-25,000. This is far higher than I imagined. Are these estimate in line with actual costs? We would consider a guided group tour company, if it comes recommend. I normally plan my on traveling but were told time and time again, that Israel needs to be done with a guide. My biggest problem with the big tour groups is having meals included with (I like to explore neighborhoods and find my own restaurants), and also staying in hotels, off the beaten path. I also like to have some down town from guided sight-seeing to do my own exploring.

Any help, alternative ideas or direction would be appreciated here.

Thanks

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