Israel's Cabinet narrowly approved a prisoner swap with Hezbollah (search) after eight hours of anguished debate, but the deal could still collapse over a Lebanese inmate who killed three Israeli civilians in 1979.

Hezbollah leader Sheik Hassan Nasrallah (searchreiterated Monday that the inmate, whom Israel refuses to release, has to be part of the deal. However, Nasrallah did not slam the door, saying he still waits to hear from a German mediator.

The 12-11 vote Sunday reflected widespread concern that the lopsided deal -- hundreds of prisoners in exchange for an Israeli businessman and bodies of three soldiers -- would signal weakness and encourage more kidnapping of Israelis.

Prime Minister Ariel Sharon (searchlobbied hard for the swap, which excludes Israel's most famous MIA, airman Ron Arad (search), who was shot down over Lebanon 17 years ago. The vote was one of Sharon's toughest leadership tests in three years.

Opponents of the deal say the Israeli government is abandoning Arad.

In an apparent attempt to defuse such criticism, Israeli security official were quoted as saying Israel might kidnap more Arab militants as bargaining chips for Arad. Two Lebanese guerrilla leaders snatched by Israel for that purpose in 1989 and 1994 are among those to be freed in the current swap.

After the Cabinet session, the government for the first time confirmed the parameters of the exchange, widely reported in the past.

About 400 Palestinians and several dozen prisoners from Lebanon, Syria, Morocco, Sudan and Libya would be released in exchange for Israeli businessman Elhanan Tannenbaum and the bodies of three Israeli soldiers, all captured in October 2000.

However, Nasrallah has said the deal would not go through without Samir Kantar, a Palestinian from Lebanon. Kantar stormed an apartment in the northern Israeli city of Nahariya in 1979, killing a man and his daughter. Another daughter died when her mother smothered her while trying to hide.

Israeli Foreign Minister Silvan Shalom ruled out freedom for Kantar. "The prime minister has stated it clearly: Kantar will not be released," Shalom said.

In Lebanon, Mohammed Safa, head of a prisoners' committee, accused Israel of trying to sabotage the deal by excluding Kantar. "Hezbollah cannot accept that and Israel knows it very well," Safa said.

Mohammed Fneish, a Hezbollah legislator, said the group would try to kidnap more Israelis if the deal breaks down. "If the pressure cards we have ... are not sufficient to convince the Israeli enemy's government to respect the freedom of our detainees ..., the Hezbollah command will definitely search for means to force the Israeli enemy's government to release our detainees," he told Al Manar TV.

In Sunday's session, the ministers voted without knowing the names of most of those to be released, but were assured that -- with the exception of several Lebanese prisoners -- they would not have been involved in killing Israelis.

This would presumably preclude the release of Palestinian uprising leader Marwan Barghouti, who stands accused by Israel of a role in attacks that killed 26 Israelis. Palestinian sources have said they expected Barghouti to be released.

Palestinians reacted with disappointment Sunday.

Issa Karake of the Palestinian Prisoners Association said he had hoped those with life terms would be among those freed. "If this standard (of not having killed Israelis) is applied, the deal will lose its value because the long-serving prisoners are those who carried out operations in which they killed Israelis," he said.

Israel is holding more than 7,000 Palestinians, most of them rounded up in Israeli military raids in the past three years of fighting. The release of prisoners is a top priority for the Palestinian Authority, but the Sharon government has freed only a few hundred, most of whom were nearing completion of their terms.

The deal might not have an immediate effect on the Israeli-Palestinian conflict. However, it could further boost Hezbollah's popularity among Palestinians and reinforce a widely held belief that Israel only responds to force.

Sunday's vote came after a charged eight-hour debate, in which three security chiefs -- the heads of the army, the Mossad spy agency and the Shin Bet security service -- offered conflicting opinions.

The army chief, Lt. Gen. Moshe Yaalon, was in favor, saying the price to be paid was reasonable, while the head of the Mossad, Meir Dagan, warned the exchange would boost Hezbollah's standing in the Arab world.

Sharon brushed aside the criticism, and told ministers that the ailing Tannenbaum -- who reportedly was tortured and had all his teeth pulled by his captors -- would die in Lebanon if the deal was rejected.

However, opponents said the price is too high. "The message that will be given by a 'yes' vote is clear, that kidnapping really pays," said Uzi Landau, a Cabinet minister without portfolio.

Israel has carried out lopsided exchanges in the past, releasing thousands of Arab prisoners for several Israeli soldiers.