The Israeli Cabinet yesterday discussed but took no action on the issue of the Shiloh settlers - a small band from the nationalist Gush Emunim movement which has announced plans to build a new settlement on the West Bank in apparent defiance of the government.

The group has a permit to prepare the ancient biblical site of Shiloh for archeological exploration but not to establish a permanent settlement.

President Carter recently sent a personal note to the Israeli government criticizing the apparent Shiloh settlement and he later expressed confidence that the Israeli government had not authorized a civilian settlement there. The United States holds that all Israeli civilian settlements in the occupied territories are illegal and Carter said he had a personal commitment that no new ones would be allowed.

Cabinet spokesman Aryeh Naor said following yesterday's Cabinet meeting that the government had discussed the matter only because of misrepresentations in the press. Noar said the government could not move against the Gush Emunim group until it violated the terms of its permit.

When asked what would constitute a violation of the permit, Naor suggested that setting up a bank would indicate that the settlers intended to build a town. Their present medical clinic, however, could not be viewed in the same light, the spokesman said. When asked how long the settlers would be allowed to remain on the site, Naor said simply that archeological preparation took a long time.

"In Shiloh there was an ancient town some 3,500 years ago," Naor told reporters. The self-proclaimed settlers had "a license to find this ancient town, not to build a new one."

Recent editorial comment in the Israeli press indicates that not everybody in Israel believes the government's line on the Shiloh settlement.

"Apart from the questions which have arisen about the archeological legitimacy of the enterprise," the Jerusalem Post said, "certainly the decision to bow to Gush Emunim pressure and the zealousness of the official settlements departments in carrying it out have only served to trigger an unnecessary argument with Washington and cause damage to Israel's cause in American public opinion, over which the government otherwise expresses such pious concern."

On Friday the independent Haaretz took an even stronger view.Under the title, "is honor at Shiloh," the paper said that the "afair of the archeological camp does not add honor to the government of Israel."

Beyond the entire issue of settlements in the occupied territories, the Shiloh affair raised questions about the "credibility of the government," the paper said.