Israeli forces battled gunmen and searched homes in Nablus and the Jenin refugee camp Friday, as a planned meeting between a U.S. envoy and Palestinian leader Yasser Arafat raised hopes that cease-fire talks might soon begin and halt a weeklong Israeli offensive.

A standoff at the Church of the Nativity in Bethlehem entered its fourth day, and protesters in the biblical city planned an anti-American demonstration later in the afternoon.

Israel refused to allow American mediator Anthony Zinni to visit Arafat earlier this week. But the Israelis agreed to the meeting after President Bush gave a speech Thursday urging Israel to stop the incursions and withdraw from the West Bank. For the past week, troops have trapped Arafat in his office in Ramallah.

The Palestinians and Israel have both welcomed Bush's new peace initiative, which includes a visit to the region next week by Secretary of State Colin Powell.

But Israeli Radio reported that Israeli forces were speeding up their occupation of West Bank cities, hoping to cover as much ground as possible before international pressure forced them to withdraw.

Israeli officials and newspaper editorials noted that Bush did not demand an immediate withdrawal from the West Bank and did not provide a timeline.

Haaretz, the leading Israeli daily, said in a front-page analysis that Bush "granted Israel a few more days' grace to complete" the offensive. The paper said the campaign — dubbed "Operation Protective Shield" — could continue until Powell arrived.

Israeli Interior Minister Eli Ishai, also a member of the security cabinet, argued that the Americans are not facing a timeline in their war on terrorists and that the Israelis also shouldn't be forced to meet a deadline.

"I can assure you that we will stay in the [Palestinian] territories for a far shorter period than the Americans have stayed in Afghanistan," Ishai told Army Radio. "It's the same action. It's a very similar action."

In the old city of Nablus, three Palestinian gunmen were killed early Friday, witnesses said, as Israeli helicopter gunships fired at armed Palestinians. Doctors opened a makeshift hospital in a mosque because ambulances could not enter, they said.

Israeli soldiers were unable to enter the old city or the nearby Balata and Askar refugee camps because of heavy Palestinian resistance, the witnesses said. The Israeli military said soldiers did not try to enter the three places.

Four Israeli soldiers were killed Thursday, three in intense fighting at the Jenin camp, a stronghold of militant militias, and another in Hebron during what Israeli military sources called a small, pinpoint operation that continued early Friday. Hebron and Jericho were the only main West Bank towns still under Palestinian control.

In a statement Friday, the Israeli military said it is holding 900 Palestinian prisoners and has confiscated 50 anti-tank grenades and two launchers, 26 machine guns, nine bombs, four belts for suicide bombers, dozens of boxes of ammunition, more than 1,300 rifles and more than 670 pistols.

Pressure was building on the Israelis to end their operation. The U.N. Security Council passed a resolution early Friday calling on Israel to withdraw "without delay." Bush also had harsh criticism of Arafat and demanded that the Palestinian leader crack down on militants and stop terror attacks against Israel.

In a statement, the Israeli Foreign Ministry welcomed the Bush initiative. "We note with satisfaction President Bush's words on the necessity to put an end to terror," the statement said.

The Palestinians also welcomed the Bush speech. In a statement, the Palestinian leadership said it accepted Bush's declarations "without conditions" and criticized Israel's West Bank campaign.

"We should not be blamed when we face this aggression against our people, against our towns, our refugee camps and we have the right to defend ourselves," it said. However, Palestinian Cabinet minister Saeb Erekat said Bush's harsh criticism of Arafat was "unjustified and unacceptable."

Powell called Arafat early Friday, said Arafat aide Nabil Abu Rdeneh. He said they discussed the Bush speech, and Arafat accepted Bush's proposals.

Last Friday, Israel launched "Protective Shield," its largest military operation in two decades. It included the call-up of about 30,000 reserve soldiers and a policy of "isolating" Arafat and sending the military into Palestinian towns and refugee camps, seeking suspected militants, weapons and explosives.

The trigger was a March 27 attack at the start of the Passover holiday that killed 26 Israelis attending a Seder, a ritual meal, in a hotel. Since then, 78 Palestinians and 63 Israelis have been killed.

In the past week, Israeli forces have arrested more than 1,100 Palestinians as they swept into the major West Bank towns of Ramallah, Qalqiliya, Jenin, Tulkarem, Bethlehem, and Nablus.

Permission for Arafat to see Zinni was the first sign that Israel might be easing its chokehold, but Prime Minister Ariel Sharon said that despite Bush's request, the military operation would continue.

Also Thursday, Israeli military chief of staff Lt. Gen. Shaul Mofaz came out publicly for the expulsion of Arafat from the West Bank. Declaring that Arafat supports terrorism, Mofaz told a news conference, "it's preferable that he would be outside."

Defense Minister Binyamin Ben-Eliezer promptly rebuked Mofaz. He said the military commander has a right to his opinions but must keep them to himself, "certainly after the government has made a decision."

In a political development, the hardline National Religious Party has in principle agreed to join the government, strengthening the hardline faction within Sharon's central-right coalition.

The Associated Press contributed to this report.