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Also, with regard to the medinah being created against halachah, I don’t know if that’s a reason not to give hakaras hatov. If a person steals money and gives it to you, you’re probably not allowed to use it. But if you are allowed to a use it, you probably have to thank him for it. The fact that he broke halachah is between him and HaShem and that has nothing to do with your hakaras hatov.
So too here, if the medinah’s breaking of halachah affects you, then don’t learn in Eretz Yisro’el, don’t daven there, in fact don’t go there at all. But if you are allowed to benefit from the “sins” that they did, then you have to show hakaras hatov. HaShem will deal with the halachos that they violated, that’s not your job.