Agreed. This is the key phrase here. "Deliver". Building a nuclear weapon is only part of the equation. Delivering it such that it gets somewhere that evades defenses and detonates in a place and manner in which it's effective is hard.
Tsar Bomba, since it was mentioned, was an impressive device, but utterly impractical as a weapon. It was of enormous weight and required unreasonable engineering just to drop it.
You're also quite right in that nuclear weapons, while powerful, are not necessarily the "end all" that they're often made out to be. Israel's geography does complicate this somewhat; there's little strategic depth and much of the population is concentrated along the coast which makes the impacts disproportionately larger against Israeli national assets.
What? How big of a nuke do you think they can deliver? Tsar Bomba could take out a major city, and had a blast radius roughly comparable with Tel Aviv. This is horrific to even contemplate; I've got friends who live there. But it's nowhere even close to the entirety of Israel; and you can bet your ass that their nukes are distributed well enough to prevent a single point of failure. If Iran got a single nuke off, Israel would still be capable of a disproportionate response.