Egypt responded tonight to Israel's take-it or-leave-it decision on a peace treaty by repeating its insistence on conditions that eh Israeli Cabinet has turned down.

The Egyptians have said they expect the negotiations in Washington to continue. But now that Israeli Foreign Minister Moshe Dyan has said there is nothing left to negotiate. President Anwar Sadat has been put in a position where he seems to have little choice but to call Israel's bluff, observers, here said.

Prime Minister Mustapha Khalil, in a statement distributed after Sadat received a telephone call from President Carter, said Egypt was firm in its insistence on a timetable linking peace with Israel to establishment of Palestinian self rule in the West Bank and Gaza.

Egypt, he said, wants "a clear-cut wording which leaves more ambiquity on the link and timetable for the West Bank of the Jordan and the Gaza Strip." He said Egypt still insists on a "comprehensive settelement," which is Egyptian shorthand for a peace treaty that specified not only the end of Israeli military rule in the occupied territories and establishment of Palestinian autonomy there, but the date on which it is to occur.

He said Sadat would send Carter a message next week explaining the Egyptian position on this issue, the one remaining obstable to a treaty, but one that looks more and more difficult to resolve.

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The Israelis, fearing that a timetable would not be met in the face of Palestinian and Jordanian opposition, have refused to set one Sadat, determined to show the other Arabs that is is not making a separate peace with Israel, has said on innumerable occassions that he would not sign a treaty without. Thus what some analysts regarded as an Egyptian negotiating ploy when the Washington talks opened nearly six weeks ago has taken on a life of its own as the last big hurdle to be cleared.

Dayan's reported comments in Israel today did not fit in with what well placed Egyptian sources have been sketching as the probable course of events over the next few weeks. The Egyptians believed that after Israel's rejection of the linkage demand, which they predicted, and a haitus in the talks, there would be further negotiations aimed at nudg [TEXT OMITTED FROM SOURCE]