Hamas militants triumphantly displayed remains of some of the six Israeli soldiers killed in a roadside bombing in Gaza City (search) on Tuesday, prompting Israeli threats of punishing reprisals if body parts are not returned.

Eight Palestinians were killed and 123 wounded in a battle that pitted hundreds of gunmen against Israeli troops firing from tanks, helicopters and rooftops.

The violence began after midnight, when a small Israeli force entered the crowded Zeitoun neighborhood to look for weapons workshops.

As the troops withdrew around daybreak, an armored personnel carrier transporting at least 220 pounds of explosives for use in the raid was shredded by the roadside bomb.

Through the day and into the night, hundreds of troops searched Zeitoun for the remains of their comrades, which were scattered across a 300-yard radius.

"We are checking every roof and every balcony in order to locate the remnants of the armored personnel carrier and the bodies of our soldiers," army Maj. Gen. Dan Harel said.

Israeli security sources said the search could take days, creating an unprecedented situation in which many Israeli troops would remain in Gaza City — a militant stronghold — for an extended period. Israeli soldiers have raided Gaza neighborhoods before but usually withdrew after a few hours.

Al-Jazeera, an Arabic-language TV channel, broadcast a video it said showed two masked Islamic Jihad activists taking responsibility and displaying what they said was the head of an Israeli soldier on a table in front of them. Israel TV carried the footage but electronically obscured the head.

"We are not conducting any negotiations," Israeli military commander Lt. Gen. Moshe Yaalon said. "We will show no forgiveness toward those who are responsible for (what happened to) the bodies."

Palestinian leader Yasser Arafat (search) convened his security council in the West Bank city of Ramallah and issued a statement saying the Palestinian Authority (search) was in touch with "our brothers in Gaza" to solve the problem of the body parts "according to religious and humanitarian traditions."

Prime Minister Ariel Sharon (search) called an emergency session of his Security Cabinet, and participants decided not to negotiate with militant groups for the return of bodies and to continue searching for body parts, officials said.

Before the meeting, Sharon, Defense Minister Shaul Mofaz and military commanders agreed on a series of pinpoint military actions, the officials said. Army commanders recommended against targeting Arafat, security sources said.

Sharon told parliament that Israel would strike back hard.

"We will not stop fighting him (the enemy) and hitting him, wherever he operates and hides," he said.

Palestinian Foreign Minister Nabil Shaath, meanwhile, said President Bush has written to the Palestinian Authority, affirming his commitment to the "road map" peace plan and the creation of a Palestinian state.

Bush wrote that disputed issues must be resolved by the parties, said Shaath, who will meet with Secretary of State Colin Powell in Jordan this weekend.

The Bush letter appeared aimed at easing tensions with the Arab world over assurances the president gave to Sharon last month, including a declaration that Israel would not have to absorb Palestinian refugees or withdraw from all the West Bank.

Powell called the Israeli foreign minister on Tuesday, said State Department spokesman Richard Boucher, who added that "we are very concerned and shocked" about the reports from Gaza.

U.N. Secretary-General Kofi Annan expressed deep concern, especially over "the heavy fighting in densely populated neighborhoods, which is exposing more Palestinian civilians to death and injury," spokesman Fred Eckhard said. Annan urged the Israelis and Palestinians to stop fighting and resume negotiations.

Israel's Channel Two TV showed footage of the armored personnel carrier with its sides blown out and pieces of armor plating scattered over a wide area.

Hamas militants displayed pieces of metal and bits of flesh, laying them out on the ground. In another scene, a Hamas gunman on a motorcycle held a bloodied burlap bag with body parts.

Hamas claimed responsibility for the roadside bomb, but two other groups, the Al Aqsa Martyrs' Brigades (search) — linked to Arafat's Fatah (search) movement — and Islamic Jihad, said they also had some remains. They offered to negotiate with Israel.

The International Committee of the Red Cross (search) said it was approached by Israel with a request for help retrieving the remains.

The deaths of the six soldiers — the highest casualty count in a single army operation since November 2002 — renewed debate over Sharon's proposed withdrawal from Gaza. Sharon says he wants to reduce friction and create defensible borders, but the plan was vetoed by his Likud Party (search).

In a separate incident Tuesday, Israeli soldiers killed one Palestinian and wounded another near the border in northern Gaza, Palestinian security officials said. The Israeli military said there was no such incident.

Tuesday's battle was one of the fiercest in Gaza in recent months. Throughout the day, explosions and machine-gun fire from tanks and helicopters could be heard.

Hundreds of Palestinian gunmen participated, and the army eventually blocked the main north-south road. Gunmen planted mines and fired automatic rifles and homemade anti-tank shells.

Residents said one metal workshop was damaged.

In all, eight Palestinians were killed — seven in battle and one in an Israeli missile strike on a car. At least three of the dead were gunmen.

Hospital officials said 123 Palestinians were wounded, 14 of them critically, including an 11-year-old boy on life support with a head wound.

Thousands of mourners marched in a funeral procession for the Palestinians, and militants struck a defiant note.

"Our message to the cowardly Zionist army, which was defeated by the freedom fighters in Zeitoun, is to leave our land now, before it's too late," a masked gunman told the crowd.