An Israeli state attorney says a new psychiatric assessment of a former Melbourne school principal wanted on 74 charges of child sexual abuse has found she is fit to stand trial.

Key points: Ms Leifer is accused of faking mental illness

Ms Leifer is accused of faking mental illness New psychiatric assessment found Ms Leifer fit to stand trial

New psychiatric assessment found Ms Leifer fit to stand trial Israel court has further delayed extradition

But a Jerusalem judge has further delayed Malka Leifer's extradition hearing, saying her defence team needed more time to review the evidence and that a new medical report had to be signed off by the city's chief medical psychiatrist.

On February 12, Israeli police arrested 54-year-old Ms Leifer, accusing her of faking mental illness for the past three years in order to avoid extradition to Australia following an undercover police investigation.

Ms Leifer had been the principal of the Adass Israel girls' school in Melbourne before she fled to Israel after allegations of abuse were first raised against her in 2008.

At the last court hearing on February 14, a judge ordered her to undergo a new in-depth psychiatric assessment.

Malka Leifer has been accused of molesting her students at an ultra-Orthodox Jewish school in Melbourne. ( Supplied )

Report says fit to stand trial

Prosecutor Matan Akiva presented Judge Chana Miriam Lomp with a new medical report on Tuesday that he said found she was well enough to a face proceedings.

"Yesterday we received the new report. It is a very intense and detailed report," Mr Akiva told the court.

"I find it hard to see what's stopping her facing trial."

But Ms Leifer's lawyer Yehuda Fried argued that he did not have enough time to review the new psychiatrist report written by two doctors who had been observing the former principal over the past two weeks.

He also accused the prosecution of failing to provide him with all the evidence Israeli police have collected that they say proves Ms Leifer was "faking" her illness.

Mr Fried tossed boxes of medications he claimed Ms Leifer took on a table in front of the judge, arguing again that his client remained "too ill" to attend proceedings.

He said the new report was "rubbish" and he told the judge he wanted to bring a long list of psychiatrists to the court who would argue she is still not fit to stand trial.

He argued that the new report did not render earlier medical opinions invalid.

Yehuda Fried challenged police claims that the accused is not mentally ill. ( Reuters: Ronen Zvulun, file photo )

Delays could take 'years'

The judge ordered the prosecution present the defence with the complete evidence against Ms Leifer by March 28.

Outside the court, Ms Leifer's lawyer was pleased with the further delay.

"There is going to be a long debate that I estimate will take place over a number of years until it will be finally decided," Mr Fried told reporters.

At a second hearing regarding her continued detention, Ms Leifer's lawyer argued that his client was not a flight risk and should be released from custody into home detention.

The judge refused his request and said that the former principal had to remain under arrest in a psychiatric hospital.

Ms Leifer will have to appear before a judge again on March 7, where the court will re-examine her continued detention.

The former principal's alleged victims say they are extremely disappointed that the extradition trial has not yet begun.

"Our hearts are heavy with despair. We are silenced once again in the face of yet another stalling tactic to delay justice," former student Dassi Erlich said in a statement.

The Australian embassy has been closely following the case and the deputy Australian ambassador Steven Yates attended Tuesday's court proceedings.

Sorry, this video has expired Former Melbourne school principal accused of child sexual abuse appears in Israeli court

— with Ittay Flescher