Lapid is not pro-Arab, but he is anti-Judaism, which makes him anti-Jewish. HaBayit Eino Yehudi is a secular party with a yarmulke. If it really advocated a bayit yehudi, it would not have won a single seat. As it is, its message is so mixed that I don’t understand why it isn’t down there with Kadima or below the threshold with the similarly murky Am Shilem.
What is more, the moment there is alternative national service or a draft, Lapid’s whole raison d’etre is gone and he won’t ever see a Knesset seat again. He knows that, and he will therefore stay out just so he claims he is fighting for what he supposedly believes in. This way, he can delude himself into thinking he will get more seats next time.
Finally, the medine knows that the moment charedim enter the workforce, it is the end of the ugly Charedi stereotype that the ruling clique wants to enforce. It will be the beginning of a wave of tshuva, and a guarantee that if the medine still exists as anything other than a binational state along the lines of Lebanon or Rwanda it will have a frum majority in 20-50 years.