Prime Minister Ariel Sharon wants the next stage of Israel's security fence to swing around several Jewish settlements deep in the West Bank, and hopes to defuse U.S. objections by leaving large gaps in the barrier for now, an adviser and settler officials said Tuesday.

Israel's security Cabinet takes up the plan on Wednesday and is likely to approve it. Palestinians have denounced the project as an Israeli land grab.

The emerging plan is to include four settlements — Ariel, Kedumim, Karnei Shomron and Emmanuel — on the Israeli side of the barrier, said the security chief of Ariel, Eli Shaviro. Ariel (search) is the West Bank's second largest settlement, with 18,000 residents.

The barrier will eventually run through the entire West Bank, a stretch of about 370 miles. The first 90-mile segment, consisting of fences, razor wire, trenches and concrete walls, has been completed.

The United States and the Palestinians are critical of stages of the project that dig deep into the West Bank. The main proposal to come before Israel's Cabinet on Wednesday is for a fence that would wrap around Ariel and other settlements and link them to Israel; but that fence would have wide gaps, said Sharon adviser Zalman Shoval, who added that this idea was discussed with U.S. officials.

"Certain parts of the fence will be left open, at least for the time being," said Shoval. The gaps would be filled in with "security obstacles," he said, including patrols by soldiers "to make it as impenetrable as possible."

If any suicide bombers or other attackers make it through those holes, Israel might consider fencing it off completely, Shoval said. Suicide bombers alone have killed 413 people during three years of fighting.

Israel says the West Bank fence is necessary to stop the attacks and points to the success of a fence already in place for years around the Gaza Strip. No suicide bombers have crossed that fence during the current fighting.

Wrapping the fence around Ariel would mean routing the series of barriers 17 miles deep into the West Bank.

The stretch of barrier that is already built winds into the West Bank in places, cutting off farmers from their land and isolating some Palestinian villages and towns between the barrier and the "green line" with Israel, angering Palestinians. Residents fear they won't be able to get to jobs, schools and medical clinics across the fence.

"Building the wall should stop," said Palestinian prime minister-designate Ahmed Qureia (search), speaking to European lawmakers earlier this week. The only solution to the conflict with Israel is a Palestinian state in all the West Bank with east Jerusalem as a capital, he said. "There is nothing that can change that," he said.

The United States has threatened to cut back promised loan guarantees if Israel does not alter the planned route.

Sharon said Monday that Ariel and Kedumim would be included on the "Israeli" side of the barrier. "If we reach a point where the matter once again creates a dispute, we will sit with the Americans again," Sharon said.

Human rights groups criticize the plan, saying it creates hardships for tens of thousands of Palestinians who live near the barrier.

Yehezkel Lein, a researcher at B'tselem (search), an Israeli group that monitors human rights conditions in Palestinian areas, said the route of the barrier was dictated by political considerations, rather than a need to secure Israelis, because the fence incorporates West Bank Jewish settlements.

"It's clear that there is the intention to prepare the ground for future annexation of settlements [to Israel] ... and to prevent the establishment of a Palestinian state," Lein said.

Lein said some 25,000 Palestinians would be hemmed in on three sides by the new phase of the barrier alone if the plan to encircle Ariel and other settlements goes through.

Also Tuesday, Israeli troops blew up the home of an Islamic Jihad gunman who killed two people, including a 7-month-old baby, in an attack on a West Bank settlement on the eve of the Jewish New Year.

Soldiers laid explosive charges and blew up the home of Mahmoud Hamdan, 22, before sunrise in a village near Hebron, Palestinian witnesses and the army said.

Hamdan infiltrated the guarded Jewish settlement of Negohot late Friday, knocking on the door of a trailer home where a family was sharing a holiday dinner, residents said. One of the guests, a 27-year-old Jewish seminary student, opened the door and was shot in the chest. Then Hamdan entered the house and began shooting randomly, killing the 7-month-old baby girl.

Hamdan was killed by soldiers guarding the settlement.

Israel routinely demolishes the homes of gunmen and suicide bombers in an attempt to deter Palestinians from attacking Israelis. Palestinians condemn the policy as collective punishment and a violation of international law.