U.S. Assistant Secretary of State Alfred Atherton said here yesterday that the Palestinian issue was still the main obstacle to agreement on a declaration of principles for a comprehensive Middle East peace settlement.

After a 90-minute discussion with Egyptian Foreign Minister Mohammed Ibrahim Kamel, Atherton told a news conference, "In terms of the negotiations on the draft declaration of principles, the Palestinian question still remains the most difficult part of the draft declaration. And it is one we are continuing to give particular attention to."

Kamel told the reporters that the gap with Israel remained but added, "The negotiations are still going on and the intention is to narrow the gap. This will take its time."

In Beirut, the Palestine Liberation Organization accused the Egyptian government of launching a hate campaign against Palestinians so as to be able disengage itself from the fight to defend the rights of the refugees.

The charge reflected widespread Palestinian shock at a dicision announced Monday to strip Palestinian residents in Egypt of privileges almost as great as those granted to Egyptian citizens.

In Caire, Kamel criticized Israel's decision to continue to maintain Jewish settlements in occupied Arab territories. Atherton said the question of the Jewish settlements was brought up during the discussion both here and in Israel.

The United States has said it considers Jewish settlements in occupied Arab territories as an obstruction to peace.

Atherton was scheduled to fly back to Israel tomorrow after his talks here, which will include a meeting with President Anwar Sadat in the Suez Canal city of Ismailia where the Egyptian leader is resting.

Meanwhile in Jerusalem, Israeli Defense Minister Ezer Weizman was quoted as saying that Israeli settiers at an authorized archelogical camp in the occupied West Bank must start digging or risk expulsion.

The settlers are members of the nationalist Gush Emunim. They say they are in the West Bank of the Jordan River to set up a civilian town, which they call Shiloh, but the government has given them permission to stay only to carry out archeological rescarch.

Weizman was quoted by Israeli radio as saying the settlers must start excavating immediately or the government will review it policy toward the camp.