Golfer:
It’s a complex issue. First, what does it mean that Alexander saw the Earth as a ball? When you look out the window of an airplane do you see a ball? My impression is that in order to see the spherical shape of the world you would have to be well outside the atmosphere. The problem is that if you go too far away, it will appear two dimensional (such as when you look at the moon) so you still won’t be able to see a sphere. So I’m not really sure how Alexander could have seen the world as a ball. (Any scientists around here can feel free to correct what I just said, if it’s wrong.)
Now the way Sam2 explained the Yerushalmi, I can at least understand what Alexander saw – it would be like a hump coming out of the water.
However, I am not convinced of Sam’s pshat. The parallel of the Yerushalmi in the Bavli (Avodah Zarah 41a), says ???”? ???? ?????? ???’: ??? ????? ?? ???? ??? ?? ????? ???? ????: ???? ????? ?? ???? ??? ?? ????? ???? ?????: ???? ????? ?? ???? ??? ?? ????? ???? ?????
Tosafos there (s.v. k’kadur) says
?????? ???? ?????? ???????? ?????????? ?????? ??? ????? ?? ???? ?? ????? ????? ??? ??? ????? ??’ ?? ??????? ????? ?? ?? ?????
The Yaavetz, commenting on Tosafos, says ???? ???? ????? ?????? ??? ???? ????? ???? ????? ??? which I think he is discussing a round Earth vs. a flat Earth.
It happens to be that there are various statements of Chazal which can perhaps be taken either way. I would say the best assumption is that Chazal themselves did not have a definitive position on the matter. In support of this contention, see the commentary to Sefer Yetzira by R’ Yehuda Ben Barzilai of Barcelona where he says ????”? ??????? ???? ??? ???? ??? ??? ?? ???? ?????? ???? and he (quoting R’ Saadia Gaon) seems to basically say that the Chachamim were divided on this matter. (You can see the whole context at http://www.hebrewbooks.org/pdfpager.aspx?req=21827&st=&pgnum=284 although don’t ask me to explain what’s going on because I don’t really know.)
Regarding Sam’s point about how this relates to Eretz Yisrael being the highest point, see the Maharsha in Kiddushin 69a (where the Gemara says this idea) who says
???”? ???? ??? ?”? ??”? ??? ???’. ?????? ??? ????? ????? ???”? ??? ???? ???? ??? ?”? ???? ???? ??”? ???? ???? ???? ?????? ????? ???? ?????? ????? ???? ????? ??”? ??? ?? ????? ????? ???? ???????
and the Sefer Hamakneh there who says
?????? ??? ????? ??????? ??? ???? ??? ?? ???? ??”? ???? ??? ?????? ?????? ??”? ??? ??? ???? ?????”? ?”? ??? ??”? ?????? ??? ????? ????? ????”? ??? ???? ????? ??? ??”? ???? ???? ??”? ???? ???? ???? ?????? ????? ???? ?????? ????? ???? ????? ??”? ??????? ??? ????? ??? ????? ?? ???? ??? ??? ???’ ???? ????? ???? ????? ????? ??? ????? ????? ?????? ????? ?????? ?? ???? ??? ?? ?? ??? ???? ??”? ???? ????? ???? ????? ???? ???? ???? ???”? ??? ??? ?’ ?????? ???? ???? ???”? ??? ???? ??? ??? ?? ???? ?????? ???? ????? ???? ???? ???’ ?? ?????? ?”? ????? ???? ???? ????? ????? ???? ??? ??? ???’ ??? ???? ??? ?????? ?? ?? ???? ?? ?? ????? ???? ????? ?”? ???? ?????? ??????? ????? ????? ?? ?????? ??? ???? ??????? ?? ????? ?????? ??? ?????? ?? ????? ?? ??? ??? ???? ??? ???? ?????? ?? ??? ??? ????? ???? ?? ????? ?? ?? ???? ?????? ??”? ??? ?? ????? ???? ?????? ?? ??? ????? ????? ?? ???’ ?????? ????? ???? ????”? ???? ??? ????? ???? ?? ???? ??? ????? ?? ????? ??? ?”? ???? ?? ?????? ?? ???? ??? ????? ??? ???? ???? ???? ?????? ???? ???’ ?? ????? ?? ??? ???? ???? ???? ???? ?? ???? ?? ??? ????
???? ????? ?? ??????? ??????? ?? ????? ????’ ???? ???? ??? ?? ????? ?? ??? ????? ??? ?????? ????”? ??? ???? ???? ???’ ?? ???? ????? ??? ???? ????? ????? ?????? ?? ????? ????? ???? ?????? ?????? ???? ???? ???? ???? ?????? ???? ???? ??? ?????? ??”? ??”? ???? ???? ????? ??? ???? ???? ????? ???? ???? ??? ???? ??? ????? ??”? ?????? ????? ????? ???? ???? ?????? ???? ????? ???’ ???? ???? ????? ????’ ???? ??? ???? ???? ??”? ???? ??? ??? ???? ???? ?????? ??”? ????? ????? ????? ???? ???? ???? ????? ?????? ?????? ???? ??”? ?? ?????? ???? ??? ??’ ????? ?????? ?? ??”? ??? ??? ???? ??”? ????? ??? ??? ?? ????? ???? ??? ????? ????’ ????? ???? ???? ?????? ?????? ????? ??”? ?? ???? ???? ???? ?????? ??”? ??? ???? ?? ??? ??? ????? ??? ????? ???? ????? ???”? ???? ??? ?????? ???? ??? ??? ???? ??? ?????? ???? ???? ???? ?? ?”? ????? ?? ?? ??? ??”? ???? ???? ???? ?????”? ????? ???? ??? ??????? ???? ???? ????? ???”? ???? ???? ?”? ??? ?? ????? ???? ??? ???? ?? ???? ??”? ?? ???? ???? ??”? ???? ???? ???? ???? ????? ???? ????? ?”? ???? ??”? ??”? ??”? ???? ???? ??? ?? ????? ???? ??? ?”? ??’ ???? ?? ??? ??? ???? ???? ????? ??”? ???”? ?? ??’ ????? ??? ??? ??? ?? ????
?? ??”? ??? ??? ???? ??”? ??”? ???? ??? ?????? ?”? ???? ??”? ???? ????”? ????? ????”? ??? ????? ????? ?????? ?? ???? ????? ??? ?? ???? ????? ??? ????? ?????? ????? ????? ?????? ??”? ???? ??? ????? ??”? ?????? ??”? ??? ???”? ???? ?? ???? ??? ????? ?? ????? ???’ ????? ???? ???? ???? ?????? ???? ????? ???? ??? ????? ???? ????? ???’ ???? ???? ????”? ???? ??????? ??? ??’ ???? ??”? ??”? ??? ???’ ???? ?????, ??”? ???? ???? ???? ???? ???? ???? ??????? ??? ???? ??? ??? ??? ???? ????? ????? ???? ???’ ?????. ???’ ??? ???? ??? ??? ????? ???? ???? ?????? ????? ????? ???? ????? ????? ?? ?????? ???? ??”? ????? ??? ???? ???? ???”? ???? ??? ???’ ???? ????? ???? ????, ???? ??? ???? ?? ?????? ??????? ??”? ???? ??? ?? ???? ???? ??????? ?? ????? ????”? ?”? ???? ???? ???? ?? ????? ???? ???? ????? ???? ??”? ???? ??? ????? ??”? ??? ???”? ???? ?? ??????? ??”? ???? ?? ????? ????? ??”? ???”?
Sorry for the longwindedness of the post. I hope it helps somewhat.