Under the "canton" proposal, there would still be a national government in charge of the military, intelligence agencies, diplomacy, foreign trade, the currency, the banking system, etc. The "cantons" would primarily control local matters, schools, housing, family law, religious affairs, etc. So I don't think it would make much difference to military.
It would basically be transforming Israel from a unitary state (like New Zealand) to a federal state (like the US, Canada, Australia, Germany, Switzerland) - however, with the added factor that the top-level national subdivisions would be based on cultural factors rather than purely geographical ones – which would be a system more like that of Belgium.