Jerusalem definitely has the age, but it's never struck me as a place of intense urban activity. Am I wrong?

Depends where you go. The old city maybe not, but head to the rapidly growing neighborhoods on the edges of the city, and construction doesn't stop.

They keep growing the city larger and larger. Leave for 20 years and come back, and you don't recognize the scenery anymore.

Actually that's true in the old city as well - there is a huge commercial sector and it's very dynamic and alive.