A high-level PLO call on Palestinian terrorists (search) to halt attacks did not stop Israeli preparations for military action in Gaza, following a deadly bombing and dozens of rocket and mortar strikes at Israeli positions, settlements and towns.

Prime Minister Ariel Sharon (search) issued a directive on Sunday to his army to take whatever steps it sees fit to stop the attacks, saying the Palestinian leadership has failed to take even minimal steps to prevent the violence.

The bloodshed has escalated tensions with the new Palestinian leader, Mahmoud Abbas (search), whose election last week had raised hopes around the world for a breakthrough in Mideast peacemaking.

After nightfall Sunday, a tank shell slammed into a house in a Gaza refugee camp across from an Israeli settlement, killing a 28-year-old man and his 59-year-old mother and seriously wounding his father, Palestinians said. The military said there was no shelling, but tanks fired machine guns.

The bloodiest attack was late Thursday, when bombers and gunmen attacked a key crossing point, killing six Israeli civilians. Since then, mortar and rocket barrages have continued despite army raids, with several rockets falling on the town of Sderot.

Sderot residents planned a daylong demonstration on Monday, demanding government action. Stores remained shut and residents planned took to the streets in protest of the what they perceive as the government's inaction in the face of constant rocket barrages.

Early Monday, just as Sderot residents were waking to a city covered in black flags, Palestinian militants fired another homemade rocket at the town, Israeli media reported. The rocket landed in an open area, causing no injuries or damage.

"The children don't want to go to school, the kids are afraid to go out to play. Where is this ridiculous government," Yossi Hazan, an old-time resident of Sderot, ranted in anger on Israel Radio.

A few hours after Sharon gave his military free rein during a Cabinet meeting, the PLO Executive Committee called for an end to Palestinian attacks — but Israeli officials dismissed that as just words.

In a statement Sunday, the powerful PLO body called on militants to "stop all the military action that might harm our national goals and give the Israelis an excuse to obstruct Palestinian stability." Abbas is the head of the PLO as well as the Palestinian Authority.

Israeli media reported late Sunday that the head of Palestinian security in Gaza, Rashid Abu Shbak, told Italian TV that if the militants do not "exercise responsibility," Palestinian security will "exercise its authority in those areas." Palestinian officials could not verify the quotes but confirmed the tone of the remarks.

The executive committee's pronouncement was the PLO's strongest against violence since the death of longtime Palestinian leader Yasser Arafat on Nov. 11.

Israeli officials brushed off the statement and said military preparations were continuing. A senior official, speaking on condition of anonymity, repeated the Israeli stance that Abbas will be judged by his deeds, not his words.

"Despite the change in the Palestinian leadership, we note that those at the top have not begun any action whatsoever to halt the terrorism," Sharon told his Cabinet on Sunday. "The situation cannot continue."

"The army and the security forces have been instructed to step up operational activity against terrorism and they will continue to do so, without restrictions, I emphasize, without restrictions, as long as the Palestinians are not lifting a finger," he added. Sharon cut off contacts with the Abbas government after the Thursday attack.

Sharon's decision drew criticism from Egypt, which has been serving as a mediator as Israel prepares for its Gaza withdrawal.

Egypt's intelligence chief Omar Suleiman told Israeli diplomats in Cairo that Sharon had moved too quickly in cutting ties with Abbas, said an aide to Israel's foreign minister.

Israel wants Abbas to crack down on the militants. While repeatedly condemning violence as counterproductive, Abbas prefers to negotiate a cease-fire commitment with the militants. He has been in talks with the Hamas and Islamic Jihad groups.

Senior military officials, speaking on condition of anonymity, said the army was considering either a major raid or several small operations against militants. The military prefers the second option, fearing a broad operation would ruin Abbas' chances for success, the officials said.

Israel's Channel Two TV showed graphics of possible scenarios. One was a series of small raids through Gaza, with one starting as the other was ending. Another option, the report said, was to seize a strip of land the length of Gaza along the border with Israel.

Palestinian Prime Minister Ahmed Qureia said Israel is trying to sabotage Palestinian efforts to end the violence.

"This is an Israeli attempt to flee from any effort that is supposed to calm down the situation and return us to the negotiating table," Qureia said.