Is Israel in Palestine?

Yes and No. Palestine has two different definitions and Israel has two definitions.

Palestine 1: All of the lands of the former British Mandate of Palestine.
Palestine 2: All of the lands not under Israeli control in 1950 that serve as the basis for any current two-state proposal for the State of Palestine.

Israel 1: All of the lands under Israeli control in 1950.
Israel 2: All of the lands under Israeli control, both military and civil as of 2012.

Now for the spatial relationships.
Israel 1 is entirely within the borders of Palestine 1, but smaller (78%)
Israel 1 (78%) + Palestine 2 (22%) = Palestine 1
Israel 2 and Palestine 2 overlap in much of the West Bank Territories. Israel 2 and Israel 1 overlap in all of Israel 1's territories. Israel 2 does not control the Gaza Strip territories which are part of Palestine 1 and Palestine 2. Israel 2 also controls some Syrian territory not in either Palestine.