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UPDATE: 1/7 5:30 pm
Israel, Hamas and the Palestinian Authority will meet Thursday to negotiate a cease-fire plan, reports the AP.
UNITED NATIONS -- Egypt's U.N. ambassador says representatives of Israel, the Palestinian Authority and Hamas have agreed to meet Thursday for talks in Cairo on the Gaza crisis.
Ambassador Maged Abdelaziz says all the parties agreed to send technical delegations to discuss an Egyptian-French initiative to end the fighting in Gaza.
Details of the plan aren't clear, but the initiative calls for a limited cease-fire in the Israeli-Hamas fighting to allow humanitarian aid into Gaza.
UPDATE: 1/7 3 pm
Israel increased its anti-tunnel operation on Wednesday night and captured 120 suspected Hamas fighters, the Jerusalem Post reports.
Tunnel openings are frequently hidden inside houses and Palestinians reported that by 9 p.m., 30 homes had been destroyed. According to Channel 10, the army said that anti-tunnel operations would continue through the night.
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IDF Spokesman Brig. Gen. Avi Benayahu said 120 suspected Hamas fighters had been captured. He also said soldiers conducting searches had uncovered many explosive devices and tunnels. "We uncovered many tunnels for kidnapping soldiers, at least one car bomb, booby trapped dolls, tunnels - an underground city," Benyahu told Channel 10.
Hamas's mortar squads are using this network of tunnels to attack Israeli forces, reports the Daily Telegraph. It reports that this is a different set of tunnels from that used to smuggle food and weapons into Gaza from Egypt.
The squads - led by fighters believed to have been trained in Lebanon and Iran - are based inside intricate tunnel networks that can be accessed from mosques, Hamas commanders homes and public buildings. In close combat fighting, Hamas operatives use the tunnel layout to lure Israel soldiers into ambushes where they could be captured or killed.
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The advantages of tunnels for guerrilla fighters has been well known since the Vietnam War. Hamas has used its time as master of Gaza - it drove out the rivals Fattah organisation from the strip in 2007 - to prepare defences against an Israeli incursion.
The AP reports that last year's US-funded plan to disrupt the tunnels between Gaza and Egypt had little effect.
RAFAH, Egypt -- Angry at Hamas' ability to fire rockets at Israel, the United States last year allocated $23 million to help train Egyptian officials to stop the smuggling into Gaza through tunnels at a border plagued by crisis and corruption.
Months later, there is little noticeable effect: Smuggling has continued at a robust pace, allowing Hamas militants in Gaza to gain rockets to shoot at Israeli citizens. Israel's military says about 300 tunnels ran under the Gaza-Egypt border before its military offensive began Dec. 27. Since then, Israel has bombed dozens of them.
The story of the U.S.-funded program and its lack of impact on the problem is a cautionary tale of how hard it has been to control Gaza's border with Egypt _ at a time when patrolling that frontier and stopping the weapons flow are once again hot issues as mediators seek a cease-fire in Gaza.
Previous attempts to close the tunnels have largely failed, partly because of the mutual mistrust between Israel and Egypt and partly because of Egypt's inability to rein in corruption and alleviate poverty in the Sinai. The region near Gaza is home to tens of thousands of mostly disaffected Bedouin. Many of these nomads earn their living through smuggling.
Some critics say Egypt has never undertaken a truly robust effort because it hopes to use the issue to gain something it wants in turn: the right to deploy troops at the Sinai border, which was denied under the 1979 Camp David Accords. Egyptian officials also have been leery of making the border with Gaza truly normal and functioning, fearing an influx of Palestinian militancy into Egypt.
UPDATE: 1/7 12:30 pm
Israel will allow regular suspensions of its military operation on Gaza to permit humanitarian aid into the area, AP reports. It also tentatively welcomed a proposal for a cease-fire.
The Israeli military said a humanitarian corridor into Gaza will be opened at least every other day for a few hours, depending on the security situation.
Col. Moshe Levi, a Gaza liaison officer, told reporters the plan is to open the corridor daily. Peter Lerner, a military spokesman, said the corridor would more likely be open every other day, depending on security.
Haaretz reports that a top Israeli defense official will travel to Cairo for intense negotiations that begin Thursday.
A political source in Jerusalem said that the negotiations would focus on an international proposal for a security agreement over the contentious Philadelphi Route, on the Egypt-Gaza border, where Hamas militants have been digging tunnels for smuggling arms and militants.
Meanwhile, the political-security cabinet decided on Wednesday to push ahead with its ground operation, despite growing efforts to reach a truce between Israel and the Hamas-ruled Gaza Strip.
But as diplomatic pressure intensifies, the fighting continues, Al Jazeera reports.
On Wednesday, 11 Palestinians were killed by air strikes and shelling in Gaza City and in the north of the Strip.
Explosions were also reported in Jabaliya and Beit Lahia, north of Gaza, as around eight rockets were fired from Gaza into southern Israel. No Israeli injuries have been reported following the rocket attacks.
Earlier 1/7
Watch this video on the conflict. (Caution: Graphic material)
French President Nicolas Sarkozy has announced that Israel and the Palestinians have accepted a Egyptian-French peace plan -- but Hamas denies that a deal has been struck, reports CBS News.
In Syria, a spokesman for Hamas leader Khaled Mashaal told CBS News' George Baghdadi soon after Sarkozy's comments were made public that the militant group did not accept the terms of the Egyptian-French plan.
Spokesman Abu Omar said Hamas could only agree to a plan which guaranteed to end the economic blockade and to reopen the border crossings as soon as hostilities on both sides were halted; what he called a "complete package."
Read more from the AP:
Israel resumed its Gaza offensive Wednesday, bombing heavily around suspected smuggling tunnels near the border with Egypt after a three-hour lull to allow in humanitarian aid. Hamas responded with a rocket barrage. Despite the heavy fighting, strides were made on the diplomatic front with the U.S. throwing its weight behind a deal being brokered by France and Egypt.
While the Security Council failed to reach agreement on a cease-fire resolution, Egypt's U.N. Ambassador Maged Abdelaziz said representatives of Israel, Hamas and the Palestinian Authority have agreed to meet separately with Egyptian officials in Cairo Thursday.
Israeli airstrikes killed 29 Palestinians on Wednesday after leaflets were dropped warning residents to leave the area "because Hamas uses your houses to hide and smuggle military weapons."
The casualties brought the total Palestinian death toll during Israel's 12-day assault to 688 and drove home the complexities of finding a diplomatic endgame for Israel's Gaza invasion. Ten Israelis have been killed, including three civilians, since the offensive began Dec. 27.
More than 5,000 people have fled the border area, seeking refuge at two U.N. schools turned into temporary shelters.
The fury of the renewed fighting made it appear each side was scrambling to get in as many hits as possible before a truce could materialize.
"I feel like the ground is shaking when we hear the shelling. People are terrified," said Fida Kishta, a resident of the Gaza-Egypt border area where Israeli planes destroyed 16 empty houses.
In Turkey, a Mideast diplomat who spoke on condition of anonymity because he was not authorized to speak publicly said that country would be asked to put together an international force that could help keep the peace. And diplomats in New York worked on a U.N. Security Council statement backing the cease-fire initiative but failed to reach agreement on action to end the violence.
"We are very much applauding the efforts of a number of states, particularly the effort that President (Hosni) Mubarak has undertaken on behalf of Egypt," Secretary of State Condoleezza Rice said. "We're supporting that initiative."
The army, which has refused to allow journalists into Gaza, permitted two TV teams to accompany soldiers on patrol for the first time. The footage showed soldiers walking through a deserted street in an unidentified location in Gaza.
The Israeli military correspondent who accompanied the soldiers said they were concerned about Hamas booby-traps. He said they were shooting through walls, throwing grenades around corners, going from house to house looking for Hamas gunmen and using bomb sniffer dogs. Buildings showed bullet and shrapnel marks. "We used a lot of fire," said an officer in the group, Lt. Col. Ofer.
Hamas, meanwhile, fired rockets, though at a slower pace than previous days, hitting the towns of Ashkelon and Beersheba with the sort of longer range missiles never seen before this war. Rockets were still hitting the cities after midnight, but there were no immediate reports of injury.
Despite the violence, a surprise announcement in Paris on Wednesday put a spotlight on diplomacy.
French President Nicolas Sarkozy said that both Israel and the Palestinian Authority had accepted the cease-fire deal, but he made no mention of Hamas, without whom no truce could work. The Palestinian Authority controls only the West Bank while Hamas rules Gaza -- two territories on opposite sides of Israel that are supposed to make up a future Palestinian state.
Later, Israeli officials made it clear Sarkozy's statement was not exactly accurate.
"Israel welcomes the initiative of the French president and the Egyptian president to bring about a sustainable quiet in the south," said Israeli government spokesman Mark Regev.
But for Israel to accept the proposal, he said, "there has to be a total and complete cessation of all hostile fire from Gaza into Israel, and ... we have to see an arms embargo on Hamas that will receive international support."
For its part, Hamas said it would not accept a truce deal unless it includes an end to the Israeli blockade of Gaza -- something Israel says it is not willing to do.
"There must be guarantees to ensure Israel will not breach this package, including halting the aggression, lifting the blockade and opening the crossings," said Ghazi Hamad, a senior Hamas adviser.
Growing international outrage over the human toll of Israel's offensive, which includes 3,000 Palestinians wounded -- could work against continued fighting. So could President Bush's departure from office this month and a Feb. 10 election in Israel.
But Israel has a big interest in inflicting as much damage as possible on Hamas, both to stop militant rocket fire on southern Israeli towns and to diminish the group's ability to play a spoiler role in peace talks with Palestinian moderates.
The Israeli Cabinet formally decided on Wednesday to push ahead with the offensive while at the same time pursuing the cease-fire option. Israeli officials also rejected Hamas' call to open the border crossings, which Israel has largely kept closed since the group seized the territory by force in June 2007.
The military has called up thousands of reserve troops that it could use to expand the Gaza offensive. Defense officials said the troops could be ready for action by Friday.
Still, Israel briefly suspended its offensive Wednesday to allow humanitarian supplies to reach Gaza, and Israeli officials said such lulls would be declared on a regular basis.
The announcement came among growing warnings by the World Bank and aid groups of a humanitarian crisis. The Word Bank pointed to a severe shortage of drinking water and said the sewage system is under growing strain.
Solafa Odeh, a resident of the northern Gaza Strip town of Beit Lahia, said around 100 people in her community were lining up for fresh water outside a local grocery store Wednesday. "We were only allowed half a gallon each, and I saw some people walk away with their jerry cans empty," Odeh said.
Of the 688 Palestinians killed since Dec. 27, some 350 were civilians, among them 130 children, according to Palestinian officials.
During Wednesday's lull, Israel allowed in 80 trucks of supplies as well as industrial fuel for Gaza's power plant. Medics tried to retrieve bodies in areas that had previously been too dangerous to approach.
The Palestinian Red Crescent said in a statement that one of its ambulance drivers was shot by Israeli soldiers during the lull. The Israeli military said it had no knowledge of the incident.
Medic Mohammed Azayzeh in central Gaza pulled out three people, killed by shrapnel fire Sunday, from the border town of Mughraqa, where Israeli tanks had settled nearby. The medic said he also found a dead family of three, including a father cradling a 1-year-old boy.
In the Jebaliya refugee camp, residents on Wednesday held a mass funeral for 40 people killed a day before by Israeli mortar fire toward a U.N. school. Israel says Hamas militants fired mortar shells from an area near the school, and that Israeli responded to this attack.
The bodies, wrapped in blankets, were laid out in a long row on the ground, with mourners kneeling in Muslim prayer before them. Among the mourners was Mushir al-Masri, a Hamas legislator.
Also Wednesday, Israel released footage of suspected Hamas militants captured by Israeli troops. Israel's chief army spokesman, Brig. Gen. Avi Benayahu, said 120 suspected militants have been captured. He also said soldiers conducting searches have uncovered many explosive devices and tunnels.
"We uncovered many tunnels for kidnapping soldiers, at least one car bomb, booby trapped dolls, tunnels -- an underground city," Benyahu said on Israel TV's Channel 10.