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By Allyn Fisher-Ilan JERUSALEM (Reuters) - The smell of fresh paint wafts through the domed lobby of the latest Israeli arrival in East Jerusalem - a Jewish seminary in a bustling commercial area in the same building as a post office serving thousands of Palestinians every day. Palestinians and Israeli critics worry the placement of the academy in such a central location is asking for trouble in East Jerusalem, which has stayed largely trouble-free in recent years compared to the Gaza Strip and occupied West Bank, and which Palestinians hope will be the capital of a future state. Israel's annexation of East Jerusalem after its capture in a 1967 war has never been recognized, meaning most of the world views Israeli enclaves there as illegal settlements. But even when Israel froze construction temporarily in 2010, it always insisted the moratorium exclude East Jerusalem, which it views as an integral part of the country.More...