By Scott Wilson
Washington Post Foreign Service
Thursday, July 6, 2006

BEIT HANOUN, Gaza Strip, July 5 -- Israeli tanks and troops edged farther inside northern Gaza on Wednesday and exchanged hours of fire with Palestinian gunmen in the dunes overlooking the main passenger crossing into the strip, as the military gradually expanded its presence in areas used to launch crude rockets into Israel.

The incursion, spreading from the Erez industrial park, took its next steps hours after Prime Minister Ehud Olmert and senior Israeli security officials approved guidelines for a wider military campaign to force the release of a captured Israeli soldier and end the rocket fire. Tanks took up positions in former sites of some northern settlements evacuated by Israel last fall.

Before Israel's tanks pushed south, a second rocket in as many days struck the Israeli city of Ashkelon just north of the strip. It landed in a neighborhood in the southern part of the city and caused no injuries, like the previous rocket, which hit an empty school.

As Israeli tanks began moving toward this town, small squads of masked gunmen from the governing Hamas movement's military wing and other armed groups could be seen deploying at key intersections and along the dark streets of Jabaliya and Beit Lahiya, blacked out by a recent Israeli airstrike.

Two thudding explosions sounded in the dunes just north of Beit Hanoun as Israel targeted gunmen it said were burying explosives in the sand.

At least two Palestinians -- one Hamas gunman and one member of the Palestinian navy -- were killed in the strike or other clashes, Palestinian hospital officials said. Fourteen others, including seven civilians, were wounded.

This was the most intense fighting in Israel's effort to free Cpl. Gilad Shalit, 19, an army conscript captured June 25 during a raid on an Israeli post just outside Gaza by gunmen from Hamas's military wing and two smaller armed groups.

Israel's security cabinet issued a statement Wednesday saying that "preparations must be made in order to bring about a change in the rules of the game" regarding Israel's approach to the Palestinian government, controlled by Hamas. The cabinet told the Israeli military to continue targeting Hamas institutions, which have included government ministries, and Palestinian rocket launchers operating mostly from northern Gaza.

It also called for reducing "terrorists' freedom of movement by continuing to section off the Gaza Strip," which could signal an even deeper push into the strip.

The incursions here and near Rafah in the southern strip are the first since Israel removed its Gaza settlements and military bases last fall.

But ground operations have been the smallest component of a military effort across the Palestinian territories that has employed airstrikes, arrests of elected Hamas officials and artillery shelling. Israeli military officials have acknowledged that the campaign, publicly presented as an effort only to free Shalit, is also being used to weaken Hamas's grip on the Palestinian government.

"They are continuing to destroy our infrastructure," said Ahmed Bahar, a senior Hamas official and lawmaker, while visiting a battered Hamas-founded Islamic boys school hit before dawn Wednesday by Israeli missiles. "This is all to annihilate the Palestinian people."

The groups holding Shalit are demanding that Israel free some of the more than 8,500 Palestinians in Israeli jails in exchange for his release. But the security cabinet stated Wednesday that its position "is, and remains, that there will be no negotiations on a release of prisoners in exchange for Cpl. Shalit and that Israel views the Palestinian Authority as responsible for returning Gilad to Israel safe and sound."

An Israeli human rights group filed a petition Wednesday with Israel's high court challenging what it says has been Israel's policy of denying Palestinians visits with jailed relatives since Shalit's capture.

A spokesman for the Israel Prison Service said the agency would answer the complaint in a court filing. But an Israeli security official acknowledged privately that prison visits have been suspended while efforts to free Shalit continue.

The rocket fire on Ashkelon has prompted a furious response by Israel, which bombed the Interior Ministry early Wednesday morning.

The ministry building was condemned after the bombing, and employees worked amid shattered glass, debris and dangling wires to salvage what they could. The ministry told employees to begin working from branch offices in their neighborhoods.

Special correspondent Samuel Sockol in Jerusalem contributed to this report.