Vice President Bush strolled through the historic passageways of Old Jerusalem today and later tasted the frustration and dashed hopes that have long been a part of efforts to resolve the Arab-Israeli conflict.

After several days of signaling his willingness to visit Morocco to bolster the discussions that started last week between Israeli Prime Minister Shimon Peres and Morocco's King Hassan II, Bush tonight scrapped a possible visit to Rabat, Morocco's capital. Aides said the Moroccan monarch had given no indication that he wanted to see the vice president now.

In addition, prospects appeared to dim that Egypt and Israel would reach agreement on the disputed Sinai beachfront at Taba before Bush leaves the region. Although another key meeting of Israeli, Egyptian and U.S. technical officials is scheduled for tomorrow, a senior Israeli official said agreement probably would not come until late August. An Israeli Foreign Ministry source said the Egyptians are "coming on strong" in seeking an agreement, however.

The developments came as Bush continued a campaign-style tour of Jerusalem, posing for "photo opportunities" during a two-hour walking visit through the Old City and visiting an Israeli center for absorbing new immigrants.

Tonight, in his dinner toast honoring Bush, Peres took note of criticism -- including some in the Israeli press -- that Bush had come here to enhance his U.S. presidential campaign. The visit, Peres said, "is not, as many people think or say, a photo opportunity, but a policy opportunity."

Although the Bush visit to Morocco was scrapped, the Peres meeting with Hassan continued to generate ripples here. Anis Mansour, an Egyptian journalist, today brought to Israel a message to Peres from Egyptian President Hosni Mubarak.

According to the senior Israeli official, the message was friendly in tone, expressing Mubarak's delight at becoming less isolated in the Arab world as a result of the Peres visit, which has drawn sharp criticism from more radical Arab states.

But the official said the message contained no specifics about the Taba dispute. An agreement on Taba would clear the way for Egypt to return its ambassador to Tel Aviv and for a Mubarak-Peres meeting.

Meanwhile, U.S. officials said Bush would give a positive response to an expected Israeli request for a review of its weapons procurement relationship with the United States. Officials said Israel is seeking to eliminate barriers to weapons sales and procurement that do not exist for other close U.S. allies. The officials said they could provide no further details.

Bush also met today with freed Soviet dissident Anatoly Shcharansky, who is living in Israel. Shcharansky has been outspoken in urging pressure on the Soviets to release Jews who want to emigrate. Bush was asked by reporters about President Reagan's decision to use "quiet diplomacy" rather than public criticism to apply such pressure. Since before last year's summit meeting with Soviet leader Mikhail Gorbachev, Reagan has refrained from harsh public attacks on Moscow on this issue.

Bush said, "We're going to try to do both." He added that there is a "very strong role for quiet diplomacy when it comes to affecting individual releases," but "that doesn't mean you can't have broad, generic statements saying that the Soviets should comply with the Helsinki accords or that they should do what all of us publicly call for, and that is let people come home. Let families be reunited."

On another matter, Bush advisers said that an ongoing leadership struggle over who is to represent West Bank Palestinians has spilled over into plans for a Bush reception for them this week. Some who are invited and support the Palestine Liberation Organization have decided to boycott the event, an official said, while others backing Jordan's King Hussein will attend.

Earlier today, Bush and his wife Barbara were accompanied by Jerusalem Mayor Teddy Kolleck on a walk through Old Jerusalem. As they posed for pictures on a stone staircase leading to the "Dome of the Rock" mosque, an aging Arab wandered into the picture and stood behind Bush, Kolleck and others.

When a Bush aide tried to shoo him away, the old man gave him the universal Middle Eastern hand sign to "buzz off." The man later said he was Hassan Ali, 71, retired head of the Moslem guards who patrol the Temple Mount. Asked what he was doing there, Ali responded, "This is mine."