The following file was subject to Israeli Army censorship.

Army commandos stormed a children's dormitory in a Kubbutz near the Lebanese border today to free hostages seized by Palestinian guerillas nine hours earlier. All five guerrillas and three Israelis, including a 2-year-old child and a soldier, died during the seige and attack.

Ten other Israeli soldiers and four children were wounded at Kibbutz Misgav Am during the Passover holiday drama. It was the worst Palestinian terrorist attack in Israel in a year.

Defense Minister Ezer Weizman issued a veiled warning of Israeli retaliation against Lebanese-based guerrilla strongholds, telling reporters, "you'll all hear about it afterwards, not before." He said the Army would "weigh steps to be taken."

In the past, major Palestinian terrorist raids on civilian targets in Israel have been followed by retaliatory air strikes and naval bombardments of Palestine Liberation Organization positions in Lebanon. The PLO in Beirut said Israeli aircraft flew over the Labanese capital later today and that PLO antiaircraft batteries opened fire.

The Iraqi-supported Arab Liberation Front (ALF), a radical PLO splinter group, claimed responsibility for the attack on the upper Galilee kibbutz, which is just south of the Israeli border town of Metulla. In a statement issued in Baghdad, the ALF said it sought the release of 50 Palestinian prisoners held in Israeli prisons.

Althought he terrorist raid occurred on the eve of Egyptian President Anwar Sadat's Middle East peace-seeking visit to Washington, the underlying motive of its timing was thought to be an attempt by the ALF to give itself enhanced presence at a Palestine National Council meeting later this month in Damascus.

Today is also the 33rd anniversary of the founding of the Arab Socialist Baath Party, which rules Iraq.

The attack, which began at about 1:30 a.m. and climaxed with the Israeli rescue operation at 10 a.m., was the worst against Israel since four terrorists in a rubber dinghy landed at the Mediterranean coastal town of Nahariya last April 22 and killed two hostages, a man and his 5-year-old daughter.

The guerrillas, armed waith Soviet-designed Kalashnikov assault rifles and rocket-propelled grenade launchers, slipped throught he heavily secured perimeter of the kibbutz and burst into one of the several "baby houses," where small children are attended by adult kibbutz members.

The Army said Sammy Shani, 38, a kibbutz secretary on his way to make electrical repairs at the dormitory, encountered the terrorists outside the building and was killed in a burst of gunfire.

Army Chief of Staff Rafael Eitan and Gen. Avigdor Ben-Gal, chief of the northern command, told reporters upon their return from the kibbutz that the guerrillas passed through two United Nations positions in Southern Lebanon manned by Irish and Nigerian troops, and spent six hours infiltrating the border minefields and electronic fences.

Israel repeatedly has complained that the United Nations is ineffective in intercepting terrorist squads heading for the border. [U.N. officials note that the guerrillas also penetrate Christian militia and Israeli defenses.]

Eitan said the Army had received information of possible cross-border attacks, and had increased its forces in the area.

Officials said that the guerrillas, once inside Israel, passed two vacant guest houses that just a few days ago had housed a visiting West German swimming team.

Before Army units arrived at the scene, armed kubbutz members launched an attack against the guerrillas, freeing eight children and three women on the ground floor.

Officials said the guerrillas then ran to a second level, where they took as hostages Meir Perez, 25, a kibbutz member, and six children, aged 18 months to three years. Perez was bound and the guerrillas began issuing ultimatums, warning that the children would be massacred if an Army attack were made.

Kibbutz members at the scene said they heard the guerrillas shout demands that Palestinian prisoners be released, and that an airplane be readied for their escape. However, Eitan and Ben-Gal denied in a press conference that any specific ransom demands were made orally, although the guerrillas did ask for the Romanian ambassador to Israel and the International Red Cross as negotiators.

In a bizarre twist, the guerrillas demanded at one point that milk be brought for the children being held hostage. A case of milk containers, along with a portable loudspeaker, were taken to a window by an Israeli who, following instructions, was clad only in undershorts.

Authorities said it had not been determined precisely when the second Israeli victim, 2-year-old Eyal Gluska, was killed, but they said her death may have come during the initial attack.

After several deadlines imposed by the terrorist had passed, Weizman ordered the commando attack, which he said lasted three to four minutes. "To me, it looked like a lifetime," Weizman told the Voice of Israel Radio.

[The Associated Press reported from Misgav Am that when the raid was over, blood stained the children's dormitory, bullet holes ranged across the walls over playpens, tiny shoes and toys were scattered in disarray, and broken glass was everywhere.]

Army officials said leaflets were found containing the names of 50 Palestinian prisoners and a condemnation of Israel that carried the warning, "Palestine will be liberated by terror, blood and fire."

Perez was wounded in the legs, hands and back in the assault, along with the 10 soldiers, who received light injuries, officials said. Four children were slightly wounded.

Eitan said at the news conference that the border had been crossed several times since last year's Nahariya raid. Asked if Israel plans changes in its border security, the chief of staff said he was considering no conceptual changes, but the technicians were at the border and that "technical changes" could be made.

The worst terrorist attack in Israel in which hostages were taken occurred on May 15, 1974, at the Maalot school in northern Israel, in which 28 persons died, including 22 schoolchildren. the government last year, following the Nahariya attack, passed a capital punishment law for heinous terrorist attacks, but it has not been applied.

Washington Post correspondent Edward Cody reported from Beirut:

The terror raid on an Israeli commune provided a bloody and timely reminder of the Palestinian guerrilla organizations shunted aside by American, Israeli and Egyptian leaders in the Camp David autonomy talks.

The attack was carried out to coincide with Egyptian President Sadat's trip to Washington for consultations with President Carter on ways to revive the faltering negotiations, dramatically underlining the contention of most Palestinians here that the talks are an attempt to impose an Egyptian sellout on them.

"We want to reaffirm to you that all attempts made by American imperialism in coordination with you and the regime of the traitor Sadat to implement the agreement of shame -- the Camp David agreement -- will fail as long as there remains a single freedom fighter," said statement addressed to Israelis and distributed here by the Palestinian group that claimed responsibility for the operation.

The group, the Arab Liberation Front, is an Iraqi-sponsored extremist commando organization far to the left of the overall Palestine Liberation Organization led by Yasser Arafat. Its message to Israel, nevertheless, reflects a feeling shared widely among Palestinian leaders here that the Camp David negotiations represent an attempt to short-circuit their claim to the loyalties of a majority of the 3 million Palestinians in and outside the occupied West Bank and Gaza.

Arafat's own Fatah guerrilla group controls most of the territory occupied by Palestinian commandos adjacent to the 6,000 troops of the United Nations Interim Force in Lebanon (UNIFIL) along the southern Lebanese border with Israel and the Israeli-sponsored "Free Lebanon" Christian enclave.

Misgav Am occupies a strategic, elevated position along the western side of the Israeli panhandle, overlooking Christian and U.N. territory in south Lebanon. PLO communiques issued in Beirut have frequently accused the Israelis of shelling Palestinian positions in south Lebanon from the Misgav Am area, as well as from other parts of the northern panhandle.

PLO spokesmen here refused all comment on the Misgav Am operation, however, indicating Arafat did not want to be associated with it. The guerrilla chief has in the past kept his distance from unattractive commando activities that in fact were run by the PLO leadership. This was the case with Black September, the terror team responsible for the 1972 Munich Olympic games massacre of 11 Israeli athletes.

Analysts here were hesitant to point to today's raid as a sign of hardening by the mainstream PLO, however, because it is difficult to tell how much control Arafat and his aides exercise over such hard-line groups as the Arab Liberation Front.

The ALF was formed by Iraq in 1969 and Baghdad finances and controls its operations. At the same time, it has remained under the umbrella of the PLO and Arafat despite disagreements with his relatively moderate conduct of Palestinian affairs.