Israeli troops killed the suspected mastermind of a Tel Aviv suicide bombing and a second Palestinian militiaman during a West Bank chase Tuesday, and Israel's Supreme Court upheld the practice of demolishing homes of Palestinian terror suspects without warning.

Despite the ongoing violence, Israeli Defense Minister Binyamin Ben-Eliezer met the Palestinian interior minister, Abdel Razak Yehiyeh, late Monday to discuss cease-fire proposals that could lead to Israeli troops leaving some Palestinian areas. The Gaza Strip and several West Bank towns were mentioned as possible starting points. Yehiyeh and other top Palestinian officials are to meet later this week with Secretary of State Colin Powell in Washington.

In Egypt, meanwhile, President Hosni Mubarak complained that Ariel Sharon has no peace plan and suggested the Israeli prime minister was being driven by a strong dislike of Palestinian leader Yasser Arafat.

"Sharon hates Arafat. So what? Arafat doesn't like Sharon either," Mubarak told a group of Israeli reporters in Cairo. "Should Israelis and Palestinians pay with their lives for this mutual hatred? Especially you, the strong side, must find a way to move forward and put an end to this misunderstanding between Sharon and Arafat. Arafat, I tell you, is not the issue. Negotiations can be held without the leaders."

Mubarak made the unusually frank comments to the Israeli reporters who covered a Monday meeting between the Egyptian president and Israeli Foreign Minister Shimon Peres. The remarks were published in Israeli newspapers Tuesday. Sharon's advisers declined comment.

Also Tuesday, Israel's interior minister threatened to revoke the citizenship of Israeli Arabs involved in carrying out attacks on Israelis, and Sharon called it a "correct, judicious and balanced decision."

Interior Minister Eli Yishai, from the ultra-Orthodox Shas party, told Army Radio that "if I stop one terrorist from killing one Jew, not to mention more than that, it will be worthwhile to revoke the citizenship of 10 or more and to stop this terrible plague."

Israeli Arab leaders and dovish opposition politicians denounced the proposed measure as racist. Peres said he believed such a policy would be struck down by Israel's Supreme Court. However, Attorney General Elyakim Rubinstein ruled that the minister was acting legally.

Near the northern West Bank town of Jenin, the two Palestinian militiamen were tracked by Israeli forces as they left a home in the village of Jabaa around midnight Monday, relatives said. Israeli armored vehicles and helicopters both moved into the area, and there was sustained fire, according to residents.

Walid Hafez, a grocery store owner, said he and other members of the village on Tuesday found the two bodies under a tree and behind a rock, where they apparently tried to take cover. "We found a lot of bullet casings near the bodies," Hafez said.

The Israeli military said troops encountered the two wanted men in Jabaa and killed them in a chase.

Both were members of the Al Aqsa Martyrs' Brigades, a militia linked to Arafat's Fatah movement. One was Ali Ajouri, 23, accused by Israel of having sent two suicide bombers who blew themselves up in Tel Aviv on July 17. Three foreign workers and two Israelis were killed in the attack.

The military recently demolished the home of Ajouri's family in the Askar refugee camp near Nablus. A brother and sister of Ajouri have been ordered deported to the Gaza Strip, but the order is being challenged in court.

In Jerusalem, Israel's Supreme Court rejected a petition by Palestinian relatives of terror suspects whose homes are slated for demolition by the Israeli military. Petitioners asked for 48 hours notice to give them time to go to court to stop demolitions. The military said soldiers would be put at risk if warning was given.

Israeli troops on Sunday demolished nine homes of terror suspects, a controversial practice that Israel abandoned several years ago but has recently revived. Human rights groups say house demolitions constitute collective punishment and violate international law. The Israeli government said it is engaged in a war against terrorism, and that house demolitions are an important deterrent.

In the Gaza Strip, Israeli helicopters fired missiles at a suspected weapons factory late Monday, lightly injuring four people and damaging three buildings. It was the first airstrike against Gaza since July 22 when a one-ton bomb dropped by an F-16 killed 15 Palestinians, including the Hamas military leader and nine children.

The Israeli helicopters fired three missiles at a spare parts factory in Gaza City's Zeitouni neighborhood, which is known as a Hamas hub. Salim Bahtiti, 25, son of the factory owner, denied the shop was used to make weapons.

Since the July 22 airstrike, the Islamic militant group Hamas has claimed responsibility for two deadly attacks: a bombing at Jerusalem's Hebrew University last Wednesday that killed seven people, five of them Americans; and a suicide bombing on a bus Sunday that killed nine passengers.

In all, Sunday's death toll reached 13, with shooting attacks in Jerusalem and the West Bank. Three assailants were also killed.

Following the attacks, Israel on Monday said it would bar Palestinian travel in much of the northern West Bank and it sent tanks to seal off the town of Rafah and a nearby refugee camp in southern Gaza.

The measures broaden the already tight restrictions Israel has imposed on seven major West Bank cities and towns it occupied in June in a bid to stop terror attacks, including rolling curfews that keep Palestinians at home for days on end.

Under the new travel ban, Palestinians will not be able to drive in the northern half of the West Bank, between the towns of Nablus, Jenin, Qalqiliya, Tulkarem and Ramallah, the army said. Some movement will be permitted in the southern West Bank, including the towns of Hebron, Bethlehem and Jericho.