I think Israel is getting more religious, but the secular are more and more removed from Jewish tradition, so they see absolutely no reason to have any limitations on what they can do on Shabbos.

We've had this convo b4 and I've shown you stats - my side is winning locally and globally.

Here are some Israeli specific stats: http://en.wikipedia.org/wiki/Demographics_of_atheism#Israel
Israel[edit]
Main article: Irreligion in Israel
In Israel, around 50% of Israelis who were born ethnically Jewish consider themselves "secular" or hilonim, some of them still keep certain religious traditions for cultural reasons, but most are immersed within the secular Jewish culture. The number of atheists and agnostics is lower, and it stands at 15% to 37% respectively. The 2009 Avi-Chai study found 77% of Israeli Jews believe in a "higher power", while 46% define themselves as secular, of which 8% define themselves as "anti-religious".[74] Conversely, the Fridman report for 2007 found that less than 20% define themselves as secular—and only 5% as anti-religious.[75]

On the whole Israel is more religious, but the secular in many cases are less connected and/or more ignorant of Judaism. A few decades ago, you didn't have BT celebrities at all. Now they are still in public light and all sorts of secular have religious children or grandchildren. Not all have it well publicized.
http://shilohmusings.blogspot.co.il/2014/08/seeing-idf-as-hand-of-g-d.html

Or maybe they're becoming more religious on their terms- they believe in God and all, but don't know why they can't watch TV or buy some milk on Shabbat.

There are many children of the religious who are no longer observant. Some in secret, some in public.

Reminds me of an old joke: God goes to his doctor and says: I used to be able to create a rock that I can't lift; but now I can't do it any more. Am I getting more or less omnipotent?