Well, it was pretty lame, and the CYE has clearly "jumped the shark" [google the reference if you're plagued by TV illiteracy] as a show. That show has always oscillated between comedic brilliance and cringey-stupidity, and the latter tendency predominates now. One reason is Larry is just too much to take separated from the womanly realism (and something approaching love) of his wife Cheryl.
It turns out that the Palestinian place has the best chicken around. So Larry doesn't hesitate to eat there, although he knows that almost all of its customers hate Jews and Israel. He becomes, in a way, a hero to the customers after they watch him try to make Funkhauser (a more spirited and loyal Jew) take off his yamaka before entering the restaurant. So he "hooks up" with a passionate Palestinian woman who calls him oppressor and occupier and stuff while having very aggressive sex with him. Funkhauser overhears one of their sessions and asks Larry how he could submit to that verbal degradation. He simply responds that he doesn't care because it's the best sex ever
The Palestinian chicken people decide to open a second location next to Larry and his friends' favorite Jewish deli. All of Larry's friends show up to demonstrate against this inappropriate and insensitive act. All the Palestinians are just as angrily demonstrating for their cause. Larry comes by and just can't decide whether to go with his friends (and his religious heritage, etc., etc.) or his Palestinian sexual partner and the delicious Palestinian chicken.
If there's an ironic lesson, it is: Becoming emotionally apathetic and self-centered enough to be most in touch with your ordinary desires is the key to overcoming the animosity that separates peoples, religions, nations, etc. But it's not really a lesson, because: Everyone on the show is more admirable (more loyal, courageous, loving, sensitive, etc.) than Larry. Unless you're for peace at any price, you can't be for a world in which we would be so lacking in real passion or indifferent to the suffering of others.
What Curb Your Enthusiasm and Seinfeld (and in a different way, Two and a Half Men) mock is the insipid self-centeredness of Americans in the midst of prosperity. It goes without saying that these shows get laughs through exaggeration of real tendences.
Alexis de Tocqueville, more than a century and a half ago, named this drift toward apathetic withdrawal into oneself individualism -- which he displayed as a disease of the heart. But Tocqueville, probably mistakenly, thought that individualism would have its natural limits: He was worried that we would stop being concerned citizens, but it never occured to him that we'd stop being parents and children. He assumed that people would remain passionate enough to reproduce.
But Larry on Curb Your Enthusiasm, Jerry (and George) on Seinfeld, and Charlie on Two and a Half Men are all, clearly, emotionally unfit to reproduce. They're specimens that Darwin would have a hard time explaining. And these shows, through exaggeration, help to explain the "birth dearth" among sophisticated Americans today, a democratic problem that Tocqueville didn't predict.