The Israeli government’s plan for pulling out of the Gaza Strip (search) apparently is still on track, but icy talks this week between top Israeli and Palestinian leaders have dampened the hope that the bold initiative will go ahead without derailing.

Israeli Prime Minister Ariel Sharon (search) and Palestinian President Mahmoud Abbas (search) met Tuesday in their first summit since February, when they declared a truce and cease-fire between Israelis and Palestinians. But the tête-à-tête got off to a tense start when Sharon chided Abbas for the upsurge in violence in the region — and the mood never lightened, in spite of high hopes on both sides in the weeks prior.

"This was a difficult meeting, and did not live up to our expectations," said Palestinian Prime Minister Ahmed Qureia (search). "In all the basic issues for which we were expecting positive responses, there were none."

Israeli officials were more mum on details after Tuesday's conference, with Sharon saying only that he and Abbas had "agreed during the meeting on full coordination of our exit from Gaza." Other government leaders revealed that the Israeli prime minister had offered to hand over control of two more West Bank (search) towns to Palestinians within two weeks and would consider releasing additional prisoners if active measures were taken to stop the renewed attacks.

Palestinians and Israelis have been hammering out an agreement for the August pullout of Israeli settlers and military from Gaza and parts of the West Bank, wracked by decades of bloody violence over territory and religion.

Earlier this month, both sides seemed optimistic that things were progressing smoothly.

During an appearance in New York, Israel’s Vice Prime Minister Ehud Olmert (search) — one of the chief architects of the Gaza disengagement plan — said the evacuation would happen on schedule and begin in August.

“This is something that will not be stopped. We have passed the point of no return,” said Olmert. “This is a dramatic change. It requires the utmost courage to carry this out.”

If the plan for Israeli settlement withdrawal goes forward and sticks, it will be seen as an historic step on the way to peace in the war-torn area. It would also be the start to forming a Palestinian state.

A Palestinian advocacy group in Washington that has been following the ongoing disengagement plan in Gaza also sounded hopeful before Tuesday's summit.

“This is coming together on both sides, which is positive,” said Ziad Asali, president of the American Task Force on Palestine (search). “The Palestinians need for Gaza to work, because if it fails, they will have to wait for a very long time for the opportunity to build a Palestinian entity. It will be a strategic setback for them.”

Sharon and Abbas first declared a truce Feb. 8, shortly after Abbas was democratically elected with just over 60 percent of the vote.

Since that declaration, violence had ceased — that is, until last weekend, when it kicked up again with the terrorist group Islamic Jihad waging strikes that killed two Israelis. Israel retaliated with the arrests Tuesday of 52 suspected militants from the group in a West Bank (search) sweep that marked the first major crackdown on terrorists since the truce. The raid continued Wednesday, with Israeli forces nabbing an additional 11 Islamic Jihad extremists.

Under the terms of the Gaza disengagement agreement, Israeli settlements that have been set up in Gaza and parts of the West Bank since 1967 must move, the cease-fire between the two sides must remain in effect and Palestinian attacks on Israelis must stop.

Israel has wanted to prohibit Palestinians from reopening their own airport in Gaza and from allowing them to travel to jobs in Israel.

But Israel Radio reported this week that Sharon may have reversed the government's position on the airport, giving Abbas permission Tuesday to begin preparations to reopen both the Gaza Strip airport and harbor.

Olmert has previously said that international flights overseen by the Palestinians pose too much of a security risk, and the ban on Palestinian employment inside Israel is part of a deliberate move to keep the two economies separate.

Last month, during the World Economic Forum (search), Olmert pledged that Israel would turn over the Rafah crossing between the Gaza Strip and Egypt to the Egyptians within a few months of Israeli evacuation, and make significant changes in Israel's economic blockade of Palestinians in the region.

"It is obvious that they [Palestinians] have a great chance of moving forward only with the assistance of Israel," Olmert told FOXNews.com at the June 9 New York event. "They have suffered, and this is their chance."

But the Rafah issue is apparently still a sticking point in negotiations, according to other Israeli officials.

The pullout agreement has its die-hard detractors, of course — many of them extremists on both sides.

In fact, the Israeli government has had to ward off a hailstorm of criticism from both pro-Israeli settlement groups and some pro-Palestinian groups — the former for giving up too much in what to them has always seemed like a shaky truce, the latter for not doing enough to help impoverished Palestinians in their plight.

The pro-settlement groups are opposed to the plan for obvious reasons: Thousands of them will lose their homes and be displaced, and they feel betrayed by their government.

"This is a very difficult process for thousands of Israelis who have to leave their homes, but the vast majority of Israelis believe this is a decision that will allow Israel to be more secure and provides the opportunity for Palestinians to begin to build a civil society," said Josh Block, spokesman for the American Israel Public Affairs Committee (AIPAC) (search), the American pro-Israel lobby group.

Because of the skepticism and in some cases negative publicity the disengagement agreement has met with, Olmert said it has been crucial to stay focused — and stay out of the fray.

“We focus on the negotiations, not on the publicity,” he told FOXNews.com. “We try not to be under the pressure of the publicity, and just deal with these issues.”

The peace plan has been "evolving within the Israeli administration for a couple of years," the Task Force on Palestine's Asali said. "It has of course caused political division within Israel for Sharon, within his own party, but by and large, he has maneuvered the situation well."

Both sides seem to agree that ending terrorism and violence is crucial if progress is to be made.

"The violence of the last several years has been very detrimental to Palestinians and their cause," said Asali. "[Abbas] had the courage to say he is committed to the end of violence. The question is, can he deliver? ... He's working on it."

Though the road to peace is long, rocky and treacherous — with the fragile nature of the plan highlighted by Tuesday's disappointing meeting — the majority of Israelis and Palestinians still seem to believe that navigating it successfully will be well worth it in the end.

“We believe happier Palestinians are better neighbors. The less bitterness there is, the more goodwill,” Olmert said. “We are at a very dramatic juncture in the history of the Middle East. Everything depends on it.”