Just heard John Stewart talking about Iran's annual "Jerusalem Day". It sounded odd because I've usually heard it called "Al-Quds" day, and, although he hesitated for a second working out what to call it, but he didn't mention 'al' or 'Quds' at all.
It's a tricky question. On the one hand, English speakers are far more likely to know it by the Hebrew name than the Arabic name or both, so it makes what was basically a passing comment easier to understand. On the other, you wouldn't expect a government who doesn't recognise Israel and sees Jerusalem as exclusively Muslim property to use anything other than the Arabic name for it. On a couple more hands, 'Al-Quds' enforces the idea of otherness on the Arab and Muslim world, but 'Jerusalem' diminishes the Arab/Muslim claim to the city, even when that claim is the main point of the event. In this case I would personally have said "Al-Quds - that means Jerusalem - day" or something like that. Only four extra syllables, and wouldn't have taken much more time than the pause. But which one to use normally is a bit of a dilemma.