Israeli troops and tanks left the Rafah refugee camp (search) on the Gaza-Egypt border after sundown Monday following a weeklong sweep for militants and weapons-smuggling tunnels, military officials said.

Earlier, an Egyptian mediator met Israeli and Palestinian leaders to discuss a possible Israeli withdrawal from Gaza, while Prime Minister Ariel Sharon (search) tried to persuade reluctant government hawks to support his "disengagement" plan.

The exit of the last Israeli forces from the Rafah camp appeared to mark the end of the raid, called "Operation Rainbow," during which 41 Palestinians were killed and two arms-smuggling tunnels were destroyed.

However, a top army officer said on condition of anonymity that the military would soon resume its mission in Rafah.

"We are taking a deep breath and then we go on," the officer said.

During the day, as Israeli troops eased their grip on sections of the camp, residents buried their dead and surveyed devastated streets, homes and farmland.

Sharon met Egyptian security chief Omar Suleiman to discuss security arrangements following a withdrawal of Israeli troops and settlers from Gaza. The pullout plan was rejected by Sharon's Likud Party (search) earlier this month, but Sharon said he would seek Cabinet approval next week for a revised proposal envisioning a gradual Gaza pullout.

In a separate meeting with Suleiman in the West Bank, Arafat said Palestinians were prepared to take control of Gaza once the Israelis leave "on condition that a Gaza withdrawal is accompanied by some withdrawal from the West Bank," Arafat aide Nabil Abu Rdeneh said after the meeting.

Sharon's plan foresees Israel withdrawing from all of Gaza and from four West Bank settlements.

Officially, Palestinian leaders insist Israel return to negotiations on the internationally backed "road map" peace plan. But Suleiman's mission suggested a willingness on both sides to make a Gaza withdrawal work.

Former Gaza security chief Mohammed Dahlan, who still wields considerable influence, said Palestinians would welcome an Israeli withdrawal.

"I think the Israeli withdrawal from Gaza represents an opportunity, and maybe it represents the beginning of an Israeli withdrawal from the West Bank," he told The Associated Press.

Sharon is not assured of majority Cabinet support for his revised proposal.

Israeli troops first withdrew Monday from Rafah's Tel Sultan neighborhood, the first area targeted in its operation. Palestinian officials said eight homes were demolished and dozens more were damaged during the past week in the neighborhood, home to 25,000 Palestinians.

Since the outbreak of Israeli-Palestinian violence in 2000, more than 11,000 Palestinians have been displaced by demolitions along an Israeli military buffer zone between Egypt and the refugee camp, the United Nations said.

On Monday, residents surveyed streets flooded with sewage and lined with damaged homes and crushed cars. Scores of homeless Palestinians were sheltered at a school.

"The world should understand that Palestinians in Rafah are looking for just two things: freedom and houses, not for food and not for violence," said Iyad Abu Teuor, 21, whose house 300 yards from the Egyptian border was demolished Friday.

Families of 16 of the 41 Palestinians killed in the operation finally retrieved the bodies Monday, taking them from a vegetable refrigerator used as a makeshift morgue. The delay heightened Palestinian anger because Islam requires immediate burial of the dead.

Israel denied it was responsible for the holdup.

About 35,000 people marched in a funeral procession as gunmen fired automatic weapons in the air and angry mourners chanted, "Death to America! Death to Israel!"

Women threw flowers and candies from balconies into coffins holding bodies draped in Islamic flags.

Israeli forces remained in other areas of Rafah as part of their operation.

Troops also pulled back from the edge of Rafah town, reopening the road linking Rafah to the rest of the Gaza Strip (search). They left behind flattened greenhouses and chicken coops, and churned-up olive and orange groves.

"These trees were planted by my grandfather, and now they came and uprooted them for nothing except destruction and killing," said farmer Suleiman Abu Halwa, 59, holding the branch of an uprooted olive tree.

In the West Bank city of Nablus, a 14-year-old Palestinian youth was killed by army fire as troops shot at stone throwers, and a senior Palestinian fugitive was seriously wounded, hospital officials said.

In another development, Israeli TV stations reported that the attorney general would close a bribery case against Sharon soon. An indictment probably would have forced Sharon to resign.

The Justice Ministry denied the reports, saying no decision has been made.