Israeli helicopters fired on Palestinians armed with rifles and anti-tank weapons in northern Gaza (search) early Thursday, the military said, stepping up actions to prevent militants from firing rockets at settlements and towns.

Hospital officials said three Palestinians were wounded in the attack.

Palestinian witnesses said Israeli forces opened fire as gunmen gathered to try to stop a military tank advance on the Jebaliya refugee camp (search), home to 100,000 poverty-stricken Palestinian refugees and a hotbed of militants.

The Israeli military said the armed Palestinians that were attacked by the helicopters were also planting bombs. Military officials said soldiers did not enter the refugee camp.

On Wednesday, militants fired eight homemade "Qassam" rockets (search) at Israeli towns despite the army operation, the military said. No one was hurt.

The Palestinian rocket fire was retaliation for an Israeli air strike on Tuesday that killed 14 Hamas militants in a training field in Gaza City, one of the bloodiest Israeli air strikes in four years of conflict.

Israel has sent forces into northern Gaza several times to try to stop the rocket fire, but the attacks usually resume after the troops leave.

Also Wednesday, Prime Minister Ariel Sharon (search) decided to move another section of his West Bank separation barrier closer to the cease-fire line between Israel and the West Bank, but he also endorsed a decision to include the largest West Bank settlement and a bloc of smaller ones near Jerusalem on the "Israeli" side of the obstacle.

Sharon's decision came during a meeting with defense officials, who presented a revised route for parts of the barrier, in line with an Israeli Supreme Court directive that planners must try harder not to disrupt the lives of Palestinians.

Meanwhile, a lengthy Palestinian leadership crisis flared again Wednesday when Prime Minister Ahmed Qureia sent a letter of resignation to Palestinian leader Yasser Arafat, but Arafat refused to accept it.

A Palestinian Cabinet minister, speaking on condition of anonymity, said the resignation was sent after the two had a heated meeting on Tuesday, each charging the other with trying to undermine his authority.

Efforts were under way to calm the dispute, the official said. Qureia has often threatened to resign because of power disputes with Arafat.

Israel has already erected one-third of the 425-mile separation barrier. Regarding the remaining two-thirds, Sharon deferred decision Wednesday on perhaps the most contentious section — near the Jewish settlement of Ariel in the center of the West Bank.

Despite strong U.S. opposition, Sharon is leaning toward incorporating Ariel, the second-largest settlement, on the Israeli side, senior Israeli officials said, speaking on condition of anonymity.

Sharon's office said the final barrier route would be presented to the Cabinet for approval once planners complete their work.

In Wednesday's meeting, Sharon decided the southern segment would run close to the so-called "Green Line," Israel's frontier before it captured the West Bank in the 1967 Middle East war, the officials said.

This means three small settlements in the area — Susia, Maon and Carmel — will remain on the Palestinian side of the barrier. Sharon reportedly had favored incorporating the three settlements, located two to five miles inside the West Bank, on the Israeli side. Defense Ministry planners, concerned about the Supreme Court ruling, wanted the route closer to the Green Line.

The three settlements will now be ringed by individual fences.

Construction of the southern segment, near the West Bank city of Hebron, took on new urgency after Palestinian suicide bombers from the city carried out a double suicide bombing last week, killing 16 people in the Israeli city of Beersheba.

Sharon also said two large settlement blocs — Gush Etzion south of Jerusalem and Maaleh Adumim east of the city — will be on the Israeli side.

Sharon has made clear he intends to hold on to large settlement blocs even in a peace agreement. President Bush has signaled tacit approval, saying earlier this year it is unrealistic to expect Israel to remove large Jewish population centers in the West Bank.

Palestinian Cabinet minister Saeb Erekat said Wednesday the route of the barrier prejudges the outcome of any peace deal.

"The fact that Maaleh Adumim and Gush Etzion will be inside the wall (means) that they are determining the future of Jerusalem as a whole," he said.

The Palestinians seek east Jerusalem, also captured by Israel in the 1967 war, as a future capital.

Wednesday's decisions follow a series of legal challenges, including the Israeli Supreme Court ruling and a nonbinding ruling by the world court that the barrier is illegal and should be taken down.

Israel began construction of the barrier last year, saying it needs to block suicide bombers and other Palestinian attackers who have killed hundreds of Israelis in four years of fighting. The Palestinians say the project amounts to an illegal seizure of land they claim for their state.

Also Wednesday, Israeli troops shot and killed an armed Palestinian and wounded two others in the West Bank city of Jericho, military officials said.

The three Palestinians opened fire on the troops when they came to arrest one of the men, the official said, speaking on condition of anonymity. The two wounded men were taken to an Israeli hospital for treatment.