Israeli forces on Thursday set up roadblocks on main roads in the Gaza Strip, cutting the crowded seaside territory into three parts, after militants fired rockets at a nearby Israeli town, the military said.

Also Thursday, Palestinians said Israeli forces were operating in the Rafah refugee camp (search) on the Gaza-Egypt border, destroying houses. The Israeli military denied the claims.

Associated Press pictures showed residents picking through rubble strewn with broken furniture and scattered clothes.

The camp is a frequent target of Israeli searches for arms-smuggling tunnels, some of which terminate under buildings in the camp. Hundreds of camp structures have been destroyed in the current conflict.

The Israelis have been unable to stop rocket fire into Israel despite frequent army operations in northern Gaza, the launching zone. Critics of Prime Minister Ariel Sharon's plan to pull Israeli soldiers and settlers out of Gaza next year warn the rocket attacks will intensify after the exit.

On Thursday, Palestinians fired two of the homemade and primitive Qassam rockets at Sderot (search), an Israeli town of about 20,000 less than a mile from the Gaza fence.

One rocket hit a storage shack next to a house; the other landed in a field. No one was hurt.

Also, Palestinians fired several mortar shells at a Jewish settlement in Gaza, the military said. No damage or casualties were reported.

There have been no effective measures by Palestinian authorities to stop the rocket and mortar fire.

Israeli efforts have been equally ineffective. After two Israelis, including a child, were killed in Sderot in late June — the only fatalities from the rocket fire in four years of violence — Israel sent troops into northern Gaza, flattening farmland and controlling territory for six weeks before withdrawing.

Rocket fire resumed hours after the pullout.

Cutting Gaza into three parts, a frequent response to violence, is seen by Palestinians as collective punishment, though the Israelis claim the purpose is to keep militants from transferring weapons from one part to the other. The last such roadblock, last week, was canceled after a day.

Meanwhile, Palestinian leader Yasser Arafat (search) continued to resist demands by the United States, Egypt, Israel and his own people for changes that would include streamlining the security forces and reforming his corruption-plagued administration.

On Wednesday, he again stonewalled his detractors in the latest confrontation over administrative reform.

Refusing to sign presidential decrees needed for restructuring his administration, Arafat instead pledged to take the necessary steps in a letter to the parliament. The lawmakers approved it 31-12.

The recommendations included forming a viable government capable of fighting corruption more effectively and restoring law and order. They also called on Arafat to follow through on promises made in a speech last week to crack down on graft.

In his letter, Arafat emphasized the principle of separation of powers — an implied slap at the parliament for criticizing his administration — as well as turning corruption cases over to the attorney general and leaving security forces under the control of the security council, which Arafat chairs.

Reformers sounded exasperated, after several meetings with Arafat and threats of a sit-down strike failed to yield concrete results.

Former parliament speaker Rafiq Natshe voted against Arafat's letter, saying the veteran leader must face serious issues:

"Why do you protect those who are corrupt?" Natshe said in an interview with The Associated Press, as though he were addressing Arafat. "Why do you not follow the law?"

However, Abbas Zaki, who headed a 14-member parliamentary committee that presented reform demands to Arafat, welcomed the fact Arafat accepted their demands in principle.

"It's true we didn't get everything we wanted," he said, "but what we got was enough."

Sharon refuses to coordinate his Gaza exit plan — which he calls "unilateral disengagement" — with Arafat's Palestinian Authority, charging its security forces have done nothing to stop militant attacks against Israelis and have taken part in many of them.

The plan is designed to reduce friction with the Palestinians and head off international peace initiatives Sharon feels would result from the diplomatic stalemate.

The United States and Egypt warn that leaving the Palestinian Authority out could lead to chaos in Gaza and a takeover by Islamic militants. Egypt has been offering to train Palestinian security forces to fill the vacuum.