Egyptian officials indicated yesterday that more work remains to be done on the difficult issue of linking a peace treaty with Israel to progress on the Palestinian question before Egypt can approve the document.

Prime Minister Mustapha Khalil said two members of the Egyptian negotiating team, who are here for consultations with President Anwar Sadat, will go back to Washington with very clear instructions from the president that a separate peace agreement can never be signed ignoring the legal position of the Palestinians, especially in the West Bank and the Gaza Strip."

Reports from Washington that the treaty would be initialed on Wednesday are "premature," he said. Egypt, he added, does not "put much emphasis on the time element."

The Israeli Cabinet discussed the treaty proposals for six hours yesterday and one minister said afterward held before the pact is approved, United Press International reported from Jerusalem.

[Deputy Prime Ministerusalem.]

[The Israeli Cabinet discussed the treaty propo Yigael Yadin said Defense Minister Ezer Weizman briefed the Cabinet on the talks in Washington as well as on Prime Minister Menachem Begin's meeting in New York last week with Secretary of State Cyrus Vance.]

[Yadin said the Cabinet will meet again today, delaying Weizman's return to Washington, and added: "I have no doubt this government will have many more meetings" on the treaty before it is finally signed.]

In a vein similar to Yadin's comments, Egyptian Vice President Hosny Mobarak said there are "still some things which should be discussed. We stick to them and they don't change." He said he did not know when the treaty could be signed - "that depends on the other side."

Another authoritative Egyptian source, who asked not to be named, said that while substantial progress has been made in the Peace talks, there is still a "huge quantity of work to do." Even if all points had been agreed on, he said, it would take another week to put them all into legal language, and that stage has not yet been reached.

Khalil and Mobarak were speaking to reporters after they and Sadat met with the two Egyptian negotiators who returned from Washington last night: acting Foreign Minister Boutros Ghali and Foreign Ministry Undersecretary Osama Baz.

They all gathered at Sadat's rest house overlooking the Great Pyramids for a review of the negotiations that lasted less than an hour.

Khalil said his comments about the instructions to Ghali and Baz did not mean that Egypt was dissatisfied with progress that has been made so far on the linkage issue, which is apparently the only major remaining obstacle.

What was important, he said, was "to follow not only the text, but the spirit of the Camp David agreement." That agreement does not specifically link the Egypt-Israel peace treaty to the evolution of Palestinian autonomy and Israeli withdrawal from the West Bank, but the Egyptians say that linkage was agreed to by all participants in the Camp David talks.

Khalil said Sadat set up a committee consisting of himself, Mobarak, Ghali, Baz and Social Affairs Minister Amal Osman to follow up on implementation of whatever agreement is finally reached on the political and military future of the West Bank and Gaza Strip.

That means, Egyptian sources said, that Egypt already is preparing to do what it said it would do - negotiate on behalf of the Palestinians who live in the occupied territories and set up elections for them if they refuse to do it themselves.

Egypt's insistence on the Palestinian aspects of the treaty is viewed here as a message to participants in the Arab summit conference in Baghdad, who are criticizing Sadat for signing what they feel is a separate bilateral agreement that sells out other Arabs. On Saturday, Sadat refused to receive a ministerial delegation sent here from the conference in a last-minute attempt to dissaude him from his peace plans.