As outlined in Chapter 4 of the book, the Israeli air force originally expressed a preference for a locally produced version of the F-16 as the most cost effect means towards meeting Israel's future fighter needs. As proposed by the Israeli government in March 1977, the original plan called for Israel to purchase its first 50 F-16 fighters directly from the United States, with local assembly for a follow-on batch of 200 aircraft. Local assembly would have allowed the Israelis to modify the F-16 to meet their own needs, which centered around producing a more versatile air-to-ground platform - as opposed to the original F-16A, which had been envisioned as an air-to-air day fighter with a secondary air-to-ground role.
At the time that the Israeli proposal was made in 1977, the F-16XL was not yet on the drawing boards at General Dynamics. However, it is entirely plausible that had an Israeli assembly line been authorized for the F-16 (as similar assembly lines would later be approved for Turkey and South Korea), that the Israelis may have eventually produced a production version of the F-16XL - particularly after the US Air Force declined to produce the type for domestic service (in favor of the more expensive F-15E). Again, it's one of those "what if" scenarios we will never have a complete answer for.
The Israeli government proposed license production of the F-16 in Israel on two occasions - in March 1977 and again in February 1980. On both occasions, their proposals were rejected by the Carter Administration for its own political reasons. The Israelis subsequently went on to authorize development of the Lavi.
|The F-16XL illustrates its impressive bombload|
The two were nonetheless different aircraft with different design opportunities, and limitations. The F-16XL was intended to control its cost by exercising an existing F-16 fuselage, with the addition of a plug for added fuel volume, plus its unique cranked-arrow wing. The Lavi, in contrast, was a clean sheet design. The Lavi developers had more latitude to optimize their configuration, but had to strictly control the airplane's size if they wanted to control production costs on what was expected to be a relatively small production run of some 300 airframes. The F-16XL resulted in a bigger airplane, with a larger range and payload. The Lavi resulted in a very compact package with an astounding range for its small size. Again, the two design teams operated from different restrictions on what they could or couldn't do. Both great designs, but with different limitations.
Thanks again to Harry Zertner for the question.