Here is what the Israeli Special Forces have to say about it. So much for all that.
http://www.isayeret.com/weapons/assault/m16vsak47.htm
M16 Vs. AK47/Galil
One of the most common debates in weapons forums on the web is the M16 Vs. AK47 issue - which one is the better assault rifle. As probably the only western army in the world that have used both an AK47 variant (IMI Galil) and the M16 on a large scale, the IDF is often mentioned as a real life example.
The pro M16 guys claim that the IDF usage of the M16 is a clear evidence of the weapon's quality, while the pro AK47 guys claim that the IDF switched from IMI Galil to the M16 only since it received them free of charge from the U.S.
The truth is that the M16 is by far the more superior weapon. It's lighter, more accurate, more versatile, and with proper maintenance it is very reliable. Indeed, it might be less sand proof then the Galil/AK47 series. However, all you need is to clean it once a day and it will work properly. Since modern armies clean their smallarms on a daily even during combat deployment this is a non-issue.
In fact, most of the myth regarding the M16 unreliability date back to the Vietnam War when the M16 was first issued. The 5.56 ammunition given then to the troops used a low quality sticky powder that caused massive buildup of dirt in the M16 mechanism and eventually to jamming problems. When the ammunition was changed, the misfire problems disappeared as well.
The IMI Galil is heavy, not accurate and you can't place any optics on it without special adapters. Many people also don't like the Galil/AK safety mechanism but that's more a personnel preference issue. The M16 design, however, is very user friendly and allow numerous modifications to be made such as mounting various uppers. The large number of M16 variants used by the IDF for dozens and dozens of years of continuous combat deployment is a clear evidence of that.
Thus, the reason for the IDF usage of the M16 over the Galil isn't the cost. It's the pure quality of the M16 over the Galil. Most of IDF troops dislike the Galil and will prefer a CAR15/M4 over it.
Those who are using the cost factor are simply unfamiliar with the IDF assault rifles history. Short review - up until the mid 1970's the IDF standard issue assault rifle was the FN FAL. At that time most of the Israeli elite units were using the AK47, which was considered to be much better then the FAL.
During the Israeli-Arab Yom Kippur War in 1973 the U.S. made a massive airlift to Israel containing large sums of brand new M16A1 and CAR15. However, shortly after the war the IDF had adopted the IMI Galil as its new standard issue assault rifle so most of the M16 remained in storage.
The Galil wasn't a big success to say the least. Most of the IDF elite units weren't impressed with the new weapon and remained with the AK47, which also had a deniability capability in covert deep insertions operations.
In the late 1970's few SF units tried out the CAR15 and were tremendously impressed. A decade later, by the late 1980's, almost all elite units were already armed with CAR15 which was gradually replacing the IMI Galil SAR and the AK47.
Note that this was years and years before the IDF officially adopted the M16 in the early 1990's. The IDF SF units that adopted the CAR15 didn't had any cost issue at mind. They could have used either the M16 or the Galil. It made no matter budget wise, since both weapons were already available in masses. The decision was purely quality based and no one told the units which weapon to use. More clearly - in some IDF elite units the Galil was simply never used and they always preferred the CAR15 over it.
Following the influence of the SF units, in the early 1990's the IDF had officially adopted the M16 family as its new standard issue assault rifle for all infantry oriented units, including both SF and conventional units. Today, the IMI Galil is only used by the Artillery Corps, Armor Crops, stationary elements in the Anti Aircraft Corps and rear line units.
Lets again review the situation in the early 1990's. The IDF had large sums of Galil variants it procured over the years, and it also had large sums of M16 it received in the 1973 war as well as in U.S. Army surpluses shipments over the years. Both weapons were available in masses and there wasn't any current or near future need to procure either weapon. The IDF also had thousands of AK47 that were captured over the years. So the IDF could use the AK47 free of charge over M16 or Galil.
Eventually, the IDF chose the M16, so again cost wasn't really an issue. Further more, even if there was such a cost factor, then the IDF could have simply supply all rear line troops with the cheaper M16 and issue the more expensive Galil to the front line troops. The fact that the exact opposite was done speaks for itself.
Moreover, some times the cost is less of an issue. The IDF often buy expensive Israeli weapons since it's forced too by inner-Israeli political pressure. For example, the IMI forced the Israeli Police to buy the Jericho 941 handguns. The IDF managed to escape the pressure in this case and got the much better Sig Sauer 228/226. The Israeli M240 Sufa ("Storm" in Hebrew) jeep is yet another example. The fact that despite the domestic pressure the M16 was chosen over the Galil is yet another evident of its superiority.
Let's review the situation today. The IDF no longer receives M16 for free. Instead, Israel receives from the U.S. few billion dollars per year of Foreign Military Support (FMS). However, the catch is that most of this money must be spent in Dollars back in the U.S. Also, for several reasons most of the IDF orders are registered as U.S. Army orders. This allows the IDF to largely enjoy from the quantity discounts the U.S. Army receives on its large orders.
The M4 series is indeed cheaper then the Galil or even the new Tavor series. In order to buy gear and weapons using the U.S. FMS the item must be at least 50% made in the U.S. This is why the IMI is currently looking for ways to manufacture the Tavor in the U.S. - so that the IDF could buy the Tavor using FMS.
But as usual IMI was too slow and the IDF already procured large sums of the M4 replacing the CAR15. Not to mention that the Bullpup concept of the Tavor is problematic since it doesn't allow simultaneous usage of both shoulders during combat, a major tactical disadvantage, especially in CQB or in urban warfare. Yet, it appears that IDF will eventually buy small sums of the Tavor.
To summarize, the IDF chose the M16 over the AK47/Gail because the M16 is the better assault rifle in all parameters that matter. As for reliability, the M16 is reliable enough. As for cost it's a non issue. Buying weapons today is cheap. In fact, for modern armies who buy large sums, most optical sights cost much more then assault rifles per unit.