No, dividing Jerusalem would not devastate Israeli society as many people in the city no longer care about the religious implications thereof. There are many good, hardworking people who would welcome such a change and see that it would be a tremendous step toward peace with their current enemy, Palestine.
Dividing Jerusalem is not a good idea for the Israeli society. Jerusalem is an important part of their society and stripping part of it away would not be good for their society. Although it would provide many benefits, it isnt good for their culture and it was lead to a huge controversy.
It's better than having Palestinian Christians and Muslims who also consider Jerusalem holy having their land stolen and being occupied. Israelis aren't more important than everyone else. Were all human take we all should be able to have basic human rights unless your a bad person. No one Should be discriminated against for their religion.