Malka Leifer, a Melbourne school principal wanted on 74 charges of child sexual abuse, has been sent for a new psychiatric examination after Israeli police accused her of faking mental illness in order to avoid extradition.
After three years of avoiding extradition hearings, Ms Leifer appeared in the Jerusalem district court on Wednesday morning, her second court appearance in just two days.
Australia has been trying to extradite the woman since 2013, but the 54-year-old has refused to front court, with her lawyers claiming she has panic attacks, anxiety and is too unwell to face extradition hearings.
Israeli police re-arrested her on Monday, accusing her of faking a mental illness to avoid extradition.
Prosecutor Matan Akiva showed Judge Ram Winograd evidence he said proved she was fit to attend court.
He played video to the judge that he said showed Ms Leifer going to the post office by herself and signing cheques.
The video, collected by an undercover Israeli police operation, also showed the former principal shopping by herself and smiling when she met friends, the prosecution claimed.
The prosecutor also alleged Ms Leifer's sister-in-law had given false statements, claiming she "lay in bed all day".
Ms Leifer's lawyer Yehuda Fried argued that "mentally ill people still need to do their laundry".
But Mr Fried confirmed to the court for the second day in a row that his client's panic attacks and anxiety occurred specifically around the time of each court date and psychiatric examinations.
The judge acknowledged that Ms Leifer "had never attempted to run away or depart the country".
He noted that Ms Leifer appeared successfully before the Petah Tikva court the previous day and yet had still managed to appear on Wednesday, despite the claims of panic attacks around court dates.
Judge Winograd ruled that the former principal remain in custody but instead of returning to prison, he ordered she be sent to the Jerusalem district mental health facility where she could be closely observed.
The judge said he needed a new in-depth assessment before he decided if Ms Leifer was really too ill to face new extradition proceedings.
Ms Leifer's alleged victims reacted with caution to the judge's ruling.
They said they were relieved she remained in custody but were worried she would "start playing the same games".
"Will this keep going on in circles like it has for the last three years? If she was well enough to be there today, why can't the extradition trial just start?" 28-year-old alleged victim Elly Sapper told ABC News.
"We have now reached uncharted ground, because for the first time she was compelled to attend court and we believe her excuses of feigned mental illness are steadily losing their currency."
The Australian deputy ambassador to Israel Steven Yates attended the proceedings.
In a statement on Tuesday, the embassy welcomed the re-arrest of Malka Leifer and said they were "grateful" to Israeli authorities for their ongoing work to "bring her to justice."
The court will reconvene again on February 21 where the new mental health assessment will be presented.