Ibrahim Barzak And Christopher Torchia, THE ASSOCIATED PRESS

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GAZA CITY, Gaza Strip - Terrified residents ran for cover Tuesday in a densely populated neighbourhood of Gaza City as Israeli troops backed by tanks thrust deeper into the city and sought Hamas fighters in alleyways and cellars.

Enlarge Photo

THE ASSOCIATED PRESS/Anja Niedringhaus

A shell fired from an Israeli Army tank explodes over a building in the outskirts of Gaza City, as seen from the Israeli-Gaza border, Tuesday, Jan. 13, 2009.

On the diplomatic front, Egyptian mediators pushed Hamas to accept a truce proposal and, in a hopeful sign, Israel sent its lead negotiator to Cairo for "decisive" talks on a ceasefire. UN Secretary General Ban Ki-moon also headed for the region to join diplomatic efforts.

Israeli military officials say that depending on what happens with what they described as "decisive" talks in Cairo, Israel will move closer to a ceasefire or widen its offensive. They spoke on condition of anonymity because they were discussing sensitive policy matters.

Asked if Israel's war aims had been achieved, Israeli Defence Minister Ehud Barak said: "Most of them, probably not all of them."

Israeli troops now have the coastal city of 400,000 virtually surrounded as part of an offensive launched Dec. 27 to end years of Palestinian rocket attacks on its southern towns.

Palestinian medical officials reported at least 42 deaths from the conflict on Tuesday throughout Gaza.

The army said three soldiers were wounded, including an officer who was searching a northern Gaza house when a bomb exploded.

Palestinian hospital officials say more than 940 Palestinians, half of them civilians, have been killed in the fighting. A total of 13 Israelis, 10 of them soldiers, have died.

Palestinian rocket fire has dropped significantly since the offensive was launched. Some 15 rockets and mortar shells were fired toward Israel Tuesday, causing no injuries, the army said.

Fireballs and smoke plumes from Israeli bombing have become a common sight in the territory of 1.4 million people, who are effectively trapped because of blockaded border crossings. Recent fighting has focused on Gaza City, where Israeli soldiers could be increasingly exposed to the treacherous conditions of urban warfare.

The operation in Tel Hawwa neighbourhood, about 1 1/2 kilometres southeast of downtown, matched fast-paced forays into other areas designed to avoid Israeli casualties. Residents said troops entered overnight, reconnoitered the area, and then pulled back to more secure positions.

One Israeli military officer told The Associated Press that Hamas fighters often operate in small groups of up to four and have largely refrained from confronting Israeli troops at close range.

"Their strategy has mainly been to use lots of booby-traps, shooting guns and missiles from afar," the Israeli officer said on condition of anonymity because he was not authorized to speak to the media.

"Soldiers are taking lots of precautions, they are being more careful than the army has ever been before in any war," he said. "Soldiers shoot at anything suspicious, use lots of firepower, and blast holes through walls to move around."

Gabi Ashkenazi, chief of staff of the Israeli military, said Hamas militants also have put on Israeli military uniforms to try to approach troops and carry out suicide bombings.

Hamas, which is backed by Iran, cannot hope to score a battlefield victory over the powerful Israeli military, but mere survival could earn it political capital in the Arab world as a symbol of resistance to the Jewish state. Lebanon's Hezbollah, another Iran-backed group, largely achieved that goal in its 2006 war with Israel.

On Tuesday, a Gaza resident said he saw Hamas militants in civilian clothing firing rockets from the southeastern corner of the territory. He spoke by telephone and requested anonymity because of the sensitivity of the information.

Israel says it will push forward with the offensive until Hamas ends all rocket fire on southern Israel, and there are guarantees the militant group will stop smuggling weapons into Gaza through the porous Egyptian border.

Hamas has said it will only observe a ceasefire if Israel withdraws from Gaza.

"We will not allow our enemy to gain any political achievement from this war on Gaza," said Salah Bardawil, a Hamas envoy in Egypt.

Much of the ongoing diplomacy focuses on an area of southern Gaza just across the Egyptian border that serves as a weapons smuggling route, making Egypt critical to both sides in any deal.

Israel wants smuggling tunnels along the border sealed and monitored as part of any deal, and has bombed suspected tunnel sites throughout its campaign.

One resident, Khader Mussa, said he fled his house while waving a white flag as Israeli forces advanced. He spent the night huddling in the basement of a relative with 25 other people, including his pregnant wife and his parents.

"Thank God we survived this time and got out alive from here. But we don't know how long we'll be safe in my brother's home," Mussa, 35, said by telephone.

The Israeli military said it carried out dozens of air strikes on squads of gunmen, rocket launching sites and smuggling tunnels along the Egyptian border.

Dr. Moaiya Hassanain, a Palestinian Health Ministry official, said dozens of calls for ambulances had been received, but they could not be dispatched because of the fighting.

The Gaza fighting has raised tensions around the region and galvanized anger toward Israel throughout the Arab world. On Tuesday, at least one gunman opened fire at an Israeli army patrol along the desert border between Israel and Jordan, the military said. There were no casualties, and Jordan said the claim was "baseless."

In the southern West Bank city of Hebron, the Israeli military said, a Palestinian was shot and injured after he tried to grab a gun from an Israeli soldier whose patrol stopped him for questioning. The man later died, according to an Associated Press reporter who saw his body.

Humanitarian concerns have increased amid the onslaught although some aid is getting through to Gaza during daily three-hour lulls declared by Israel to allow delivery of supplies.

In Brussels, the European Union's aid chief said Israel has not respected international humanitarian aid during the war. In Oslo, Norway, the head of the UN agency for Palestinian refugees, Karen Abu Zayd, urged the Israeli army to do more to allow supplies into the besieged area.

"We are getting a lot of help from the Israeli Defence Forces on the one crossing that's open to get more and more trucks in, but it's just not enough," she said.