How are we all God's children if so much about the Old Testament is about the distinction between the Israelites and non-Israelites?

I'm reading the Bible through properly for the first time and I'm at the book of Nehemiah. So far there's been a few times were the Israelites repent and put effort into living according to the laws in the Book of Moses. That includes divorcing and sending away the non-Israel women that they've married and the children they had with these women. How is it that we're all the children of God? It seems a bit more of either you're born an Israelite or not and if you're not then you're not a part of it. It feels a bit more like there's a clear line between being an insider and being an outsider. And casting out their children because they're not pure born Israelites doesn't align with the message that we are all God's children. I guess I am just trying to understand how a religion that has this far into the Bible done a lot of effort to distinguish between the Israelites and everyone else link to us (everyone else). How are we, non-Israelites on the opposite of the world a part of it?