President Bush on Thursday praised Israeli Prime Minister Ariel Sharon as a "man of peace" and said Israel is keeping its promise to withdraw troops from West Bank towns.

Bush, however, slammed Yasser Arafat and said the Palestinian leader must do more to prevent future terrorist acts. "Mr. Arafat did condemn terrorism and now we will hold him to account" and demand that he take action against terrorists, Bush said.

The president assessed the crisis in the Middle East in a meeting with Secretary of State Colin Powell, who returned hours earlier from a mission to the region. The two were joined by National Security Adviser Condoleezza Rice, White House Chief of Staff Andrew Card and Vice President Dick Cheney, who is now expected to join Bush at his Texas ranch next week for talks with Saudi Crown Prince Abdullah.

Two weeks after demanding that Israel withdraw its troops immediately, Bush said he was satisfied that Sharon was acting in good faith.

"History will show that they responded," Bush said. "He gave me a timetable and he met the timetable."

He said he understood why Israel was keeping troops in Bethlehem and in Ramallah.

Bush said the Israeli offensive on Ramallah is understandable because five suspects in last year's assassination of Israeli Tourism Minister Rehavam Zeevi are believed to be holed up in a basement inside Arafat's compound.

"I can understand why the prime minister wants them brought to justice. They should be brought to justice if they killed this man in cold blood," Bush said.

"These people are accused of killing a Cabinet official of the Israel government. I can understand why the prime minister wants them brought to justice," he said. "They should be brought to justice if they killed a man in cold blood."

A White House official said U.S. diplomats were trying to mediate for a resolution. That official, siding with Israel on one aspect, said the suspects were taking refuge in the headquarters rather than being held in custody as Palestinians claim.

Bush also expressed hope that the standoff at the Church of Nativity in Bethlehem can be resolved.

As the president sought to fine-tune his strategy, a senior State Department official conceded in testimony to Congress that the Middle East crisis has cost America support in the Arab world. Bush needs Arab leaders to go along with his efforts to oust Iraq's Saddam Hussein, and the Middle East crisis has put those plans on hold.

"We are clearly, at least temporarily, losing some support," Deputy Secretary of State Richard Armitage told the House Appropriations' foreign operations subcommittee. "We've got a problem."

Lawmakers offered a wide range of suggestions to end the Israeli-Palestinian stalemate, including a bill by Sens. Mitch McConnell, R-Ky., and Dianne Feinstein, D-Calif., to impose sanctions on Arafat. Reps. Lois Capps, D-Calif., and Jim Leach, R-Iowa, circulated a letter asking Bush to consider sending former Presidents Bush, Carter and Clinton to the region to continue peace efforts.

The president shrugged off criticism that Powell's mission had failed.

Bush praised Powell of laying out a vision of hope for a region that was at a "boiling point" two weeks ago.

"One trip by the secretary of state will not prevent that from happening," Bush said, stressing his efforts to stem violence. "But one trip by the secretary of state laid out the framework and path to achieve peace."

"We will continue to do that," Bush said.

Neither Bush or Powell said what steps they plan to build momentum from the secretary's trip. Powell said Arafat must "not only denounce violence but take actions against those" who commit terrorist acts.

CIA Director George Tenet probably will go to the region next week, but a final decision will be made after Powell's White House meeting, an official said.

Bush is facing criticism from some Republican lawmakers and others in the party who want Israel to be given unfettered authority to crack down on terrorism. White House officials said it was not politics that led to Bush's remarks but a growing realization that both sides have deeply held views that will not be easily swayed.

The United States hopes to "restart the clock" to conditions that were in place before the Passover bombing that killed 28 people in Netanya on March 27. It was after that suicide bombing that Israeli Prime Minister Ariel Sharon sent troops and tanks into Palestinian-controlled cities, and the worst fighting of the 1-year-old Palestinian uprising has followed.

In the pre-March 27 plan, Israel would get a resumption of Tenet-led security talks, and the Palestinians would receive assurances that the political process is not far behind, said the official, speaking on condition of anonymity.

Another top official said the region will get a steady stream of visits from U.S. officials prodding the parties toward political and security negotiations.

Bush is trying to find a way to give Israel hope for an end to terror while giving Palestinians, in return, a reason to believe they will get their own state and land gains, the official said.

After Bush returned to the White House on Wednesday from his visit to Virginia, he met with Lebanese Prime Minister Rafiq Hariri, who urged Bush to continue Middle East peacemaking.

"We believe that without the help of the United States, the region is going to face a lot of problems," Hariri said.

The Associated Press contributed to this report.