Updated

Israel (search) has dropped its campaign to ban the violent Islamic Hamas (search) from Palestinian parliamentary elections, a senior official said Sunday, acknowledging defeat after President Bush pointedly skipped repeating the demand in a public appearance with the Palestinian leader last week.

In another election-related development, the Palestinian prime minister said a program is under way to disarm a militant group and bring its gunmen into the security services — a possible pattern for dealing with Hamas as it turns political after nearly two decades of deadly attacks against Israelis.

Israel never made specific threats against the Palestinians in connection with Hamas candidates in the January election, but hinted it would refuse to remove roadblocks and ease other travel restrictions vital to carrying out a free elections campaign.

Israel says it is still strongly opposed to Hamas participation because its charter calls for destruction of the Jewish state, but it will take no steps to stop it. "Are we going to go to war on this issue or interfere on this issue? No," the senior official said.

Also, Israel said if Hamas took part in the Palestinian government, there would be no hope for peace talks. That threat still hangs in the air.

"This organization will not be a legitimate partner for peace," another official said. "It's Hamas or us."

During the last five years, Hamas has carried out dozens of suicide bombing attacks that have killed hundreds of Israelis. The officials spoke on condition of anonymity because they were not authorized to make official policy statements.

The turning point came Thursday, when Palestinian leader Mahmoud Abbas (search) met with Bush at the White House. While warning Abbas that violent Palestinian groups could undermine the democratic Palestinian state-in-the-making, Bush did not mention Hamas by name nor call for its exclusion from the election — a sign that despite Israel's strong feelings, the U.S. was not going to press the point.

In three rounds of local elections earlier this year, Hamas did well, forecasting significant inroads into the power of Abbas' Fatah Party (search) when Palestinians vote for a parliament in January.

This is the first time Hamas is running candidates for parliament. Hamas skipped the only other election, a decade ago, complaining that the parliament itself is part of an interim peace accord with Israel, a pact Hamas rejects on religious principle.

Rebuffing Israeli demands to confront Hamas and disarm its cadres, Abbas prefers to achieve calm by persuasion and inclusion in political life. The effort has been partially successful at best, as violent groups continue sporadic attacks against Israelis, despite a cease-fire declared in February.

When Abbas was in Washington, Palestinian gunmen killed three Israelis in a drive-by shooting in the West Bank (search), and the Al Aqsa Martyrs' Brigades, linked to Abbas' Fatah, claimed responsibility.

On Sunday evening, Israeli troops shot dead a wanted Palestinian gunman in a shootout in the West Bank town of Tulkarem, the military said, adding that a soldier was lightly wounded during the exchange of fire. Relatives of the dead man said he was an Al Aqsa activist.

Earlier Sunday, Palestinian Prime Minister Ahmed Qureia (search) said a project is underway to train Al Aqsa gunmen as police officers and incorporate them into security forces — a way of neutralizing them.

"We have agreed today to establish five new camps for training and hosting 'stragglers'" from Al Aqsa who have not turned in their weapons, Qureia said. "We have a plan and we have started implementing it."

Previous efforts to disarm Al Aqsa have failed. An offer by the Palestinian government to buy weapons from militants fizzled, and earlier programs to give gunmen posts in security services have not yielded significant results.

Since Al Aqsa is close to Fatah, failure to bring its gunmen into the official fold would bode ill for similar efforts toward Hamas, the main Fatah rival.

Also Sunday, the main border crossing between the Gaza Strip (search) and Egypt reopened Sunday for 48 hours for humanitarian reasons.

Israel closed the Rafah terminal just before withdrawing from Gaza last month, citing security considerations. Thousands crossed the border in both directions during several days of chaos following the pullout, but the area has been mostly sealed since order was restored.

Palestinian officials said they expected 6,000 Palestinians to return to Gaza by Tuesday morning.