You can find the latest releases in two stores with locations all over the city: Tzomet Sfarim ("Book Junction") and Steimatzky. Some locations feature many books in English. However, you won't find everything you're looking for--these are small stores and nowhere close to the size of American bookstores like Barnes & Noble or Borders.
There are a handful of used bookstores in Jerusalem that feature a large selection of books in English. The best by far is the Book Gallery, located a few blocks from the center of town (right off King George Street). The Book Gallery features over 40,000 used, rare and antique books, in over 40 languages from Yiddish to Japanese. According to their website they are the largest used bookstore in the country.