On the eve of President Carter's arrival and the beginning of talks designed to break the Middle East peace impasse, Israel's Cabinet today enlarged its negotiating team to include all members of its ministerial Defense and Security Committee.

The expanded negotiating team will include Interior Minister Yosef Burg of the National Religious Party, which has instructed its three Cabinet ministers not to approve any changes to the U.S.-sponsored compromise proposals without consulting the party's central committee.

While there was no evidence that the larger negotiating panel would, by itself, present an obstacle to an Egyptian-Israeli treaty, some diplomatic analysts suggested that if Carter brings substantial changes demanded by Egyptian President Anwar Sadat, the larger group would be less likely to show flexibility.

The feeling in the Israeli parliament, judging from remarks by political leaders, is that Israel has reached the limit of concessions on major issues and that the only room for flexibiilty lies in minor language changes.

Preparation for Carter's Saturday evening arrival continued at a feverish pace. Workmen hung a reported 20,000 U.S. and Israeli flags throughout the capital and Jerusalem Mayor Teddy Kollek urged residents to turn out to greet the U.S. president.

After a reception at Ben-Gurion Airport, at which a 21-gun salute will be fired and Carter will be greeted by the entire Cabinet, the U.S. president will be driven to Jerusalem in his armor-plated limousine.

He will be met at the entrace to the city and be given the traditional bread and salt. After stopping briefly at the King David Hotel, the Carters will dine privately with Prime Minister Menachem Begin and his wife, Aliza, at Begin's residence.