I think op religion is a deeply personal and individual thing. If he had talked to you about it in advance how do you think you'd really have responded? Would you have taken him seriously or told him to wise up and forget about it? So in that respect I don't think making this decision for himself is inherently narcissistic. But I'm guessing he has other form for this which is why you're recognising this as part of that trait.
I think you need to sit down with him without the kids and when you both have time to talk without interruptions and you need to come with a list of prepared questions to understand his expectations and boundaries with this and to state your own expectations and boundaries. Then you can see if you can make it work or not.
For example you say you asked if he'll still observe Xmas with you and the kids- what did he say about that?
I'd want to know how much he's expecting you and the kids to participate in this, where the interest initially came out of, and how far he's wanting to take this.
There's a snowballs chance in hell that I'd be taking my kids to Israel in the near future as interesting as it would be to visit.
I think a lot will depend on how far he's prepared to take things, Judaism is a lifestyle really if you're practicing devoutly although not all Jewish people do just as some Christians are more strict/ devout than others. So until you get a clear picture of what he's expecting and where this is actually coming from you're kind of in the dark.
Once you have the facts you'll be able to make an informed decision on whether or not you can make it work, but the fact he really is ignoring the impact such a change would have on the family if he's expecting you all to observe elements of the faith does not bode well.
The key to making this work will require you both to be respectful and understanding of the need for everyone to compromise and good communication going forward.