In a policy shift, the White House is praising Israel's plan to set its borders with the Palestinians and is convinced those boundaries could create side-by-side states if a negotiated solution proves elusive.

Yet the course that Israeli Prime Minister Ehud Olmert outlined to President Bush is detested by the Palestinians and avoids the contentious issues that have made peace and establishment of a Palestinian state unrealized goals.

Olmert, continuing his rounds in Washington with a speech Wednesday to a joint meeting of Congress, pronounced himself "very, very pleased" with both the atmosphere and the content of his talks with U.S. officials.

Likewise, the president said in a news conference after his White House meeting with Olmert that the Israeli leader had "bold ideas" for unilateral action should talks founder on the internationally backed "road map" peace plan.

Before Olmert arrived Sunday, the Bush administration had urged him to negotiate with the moderate Palestinian president, Mahmoud Abbas, and bypass the new Hamas leadership. Hamas, branded a terrorist group by the U.S., rejects Israel's right to exist and has refused to renounce violence.

A negotiated solution is the preferred route both for Bush and Olmert, though the president found merit to the prime minister's alternative approach.

"These ideas could lead to a two-state solution if a pathway to progress on the road map is not opened in the period ahead," Bush said.

Palestinian negotiator Saeb Erekat, an Abbas ally, welcomed Bush's call for negotiations. But he rejected the notion of an imposed solution.

"President Bush said the first option is negotiation," Erekat told The Associated Press. "There is no other option."

Olmert, making his first visit to the U.S. since winning election in March, said he intended to "exhaust every possibility to promote peace with the Palestinians according to the road map."

"I extend my hand in peace to Mahmoud Abbas, the elected president of the Palestinian Authority. I hope he will take the necessary steps which he committed to in order to move forward," Olmert said.

But, he warned, "We cannot wait indefinitely for the Palestinians to change. ... If we come to the conclusion that no progress is possible, we will be compelled to try a different route."

In Jerusalem, a senior Cabinet member close to Olmert said if Hamas does not recognize Israel and renounce violence within six months Israel will move ahead with plans to unilaterally draw its final borders by 2010.

"If these things don't happen, we won't wait for years, but rather we will wait until the end of this year," Haim Ramon told Israel Radio. "This will be a year of diplomacy."

"First negotiations, and after the negotiations, if it doesn't succeed and it becomes clear that there is no (Palestinian) partner, we will move ahead with the consolidation plan," Ramon said.

Olmert gave Abbas a tall order, saying after six hours of meetings and dinner with Bush that Abbas would have to disarm Palestinian militant groups; the Palestinian government would have to recognize Israel; and previous agreements would have to be fully put in place.

Fighting has intensifying between Abbas loyalists and Hamas gunmen, and Hamas has refused to moderate its stance on Israel, raising questions about the Palestinian president's ability to deliver.

Abbas refused to disarm Palestinian factions even before Hamas swept to power in January parliamentary elections, fearing that would provoke civil war. Hamas has rejected international demands that it lay down its guns, recognize Israel and honor previous peace agreements.

Olmert told reporters he would meet with Abbas, but did not say when.

In his appearance with Bush, Olmert reaffirmed his ideas for Israel's final borders: The major Jewish settlement blocs on the West Bank where most of the 250,000 settlers live would become part of Israel, with most other settlements dismantled.

A senior U.S. official said the administration became more comfortable with the unilateral alternative because it grew convinced Olmert was serious about trying to negotiate with Abbas. It also thinks that if efforts to negotiate fail, then Olmert's ideas could be compatible with the ultimate goal of a viable Palestinian state, even if the Palestinians had little hand in creating it, said the official, speaking on condition of anonymity because he was describing private talks.

The Palestinians are pressing for a full withdrawal from the West Bank and east Jerusalem.

In addition, Olmert's plan does not begin to tackle the complex issues that have doomed peace talks before, including the status of Jerusalem. Israel claims as its capital; the Palestinians mark its eastern sector as the capital of their future state.

On Capitol Hill, the House voted Tuesday to ban U.S. aid to the Palestinian Authority and to bar diplomatic contacts with Hamas. The Senate is considering a less restrictive bill. Bush opposes the legislation on the ground that it goes too far.