Despite a new U.S. call to halt incursions, Israeli troops entered a West Bank town on Friday, killing a local militia leader in a firefight. Israel's defense minister said there would be more raids whenever his forces had new intelligence leads on the whereabouts of suspected militants.

Friday's incursion into the West Bank town of Qalqiliya was the longest and most extensive foray into Palestinian territory since Israel wound down its large-scale military offensive earlier this week. Israeli tanks rumbled into Qalqiliya at 4 a.m. and stayed until 10 p.m.

Israeli Prime Minister Ariel Sharon, meanwhile, told U.S. Secretary of State Colin Powell that he was willing to release Yasser Arafat from confinement if the Palestinian leader agreed to leave his West Bank headquarters alone, without several wanted Palestinians who have taken refuge in the besieged compound.

Sharon told Powell in a phone call that Arafat could go to the Gaza Strip or any area of the West Bank, said an Israeli official, speaking on condition of anonymity.

It appeared unlikely the Palestinian leader would agree to the Israeli terms since he has said he would not hand over the six wanted men – five allegedly involved in the assassination of an Israeli Cabinet minister and the sixth in arms smuggling.

Earlier Friday, Israeli troops fired tear gas and stun grenades toward hundreds of demonstrators marching toward the Ramallah compound to protest Arafat's monthlong confinement. At one point, Palestinians fired several live rounds from a nearby building. Israeli troops responded with live fire, and the crowd quickly dispersed. Eleven people were injured, none by bullets.

At another flashpoint, Bethlehem's Church of the Nativity, four Palestinian policemen surrendered to Israeli troops on Friday and two Palestinians inside the compound were wounded by Israeli sniper fire. The wounded were evacuated and given medical treatment, the Israeli military said.

Despite the shooting, there were signs the 24-day standoff between Israeli troops and more than 200 Palestinians inside the compound, including about 30 militiamen, was entering the final phase.

The dispute now centers on the fate of six wanted Palestinians in the church – whether they will be escorted to Gaza, as the Palestinians propose, or be sent into exile, as Israel demands, said Palestinian negotiator Salah Taameri, who was to meet Saturday with Arafat to discuss the deal.

Capt. Joel Leyden of the Israeli military said negotiations would not be open-ended and the military option remained. However, another spokesman, Lt. Col. Olivier Rafowicz said Israeli troops would not enter the compound by force.

The standoffs in Ramallah and Bethlehem have held up Israel's troop withdrawal from the two towns that were among six Israel occupied during the military offensive.

President Bush has demanded repeatedly that Israel leave the Palestinian cities, and he said Friday he'd had enough of the Israeli incursions.

"The Israelis understand my position. ... There has been some progress, but it's now time to quit it altogether," Bush said near his Texas ranch.

However, Israeli Defense Minister Binyamin Ben-Eliezer said his forces would act on any new information about the whereabouts of suspected militants.

"The Israeli military works on the basis of intelligence," Ben-Eliezer said during a meeting with troops in the West Bank. "The moment there are intelligence reports of gangs, individuals and suicide bombers, we have no other choice but to launch incursions to prevent these attacks."

More than 1,000 Palestinians were arrested in the Israeli offensive, including top militia leaders, and the interrogation of the suspects was expected to yield more information about militants still at large, Israeli military commentators said.

In Friday's incursion into Qalqiliya, Raed Nazal, the local leader of a radical PLO faction, the Popular Front for the Liberation of Palestine, was killed in a firefight between soldiers and Palestinian gunmen.

Sixteen Palestinians were arrested in the town, including several who were on Israel's wanted list, the Israeli military said. The governor of Qalqiliya, Mustafa Malki, put the number of arrested men at about 50.

Malki said Israeli troops blew up an empty four-story building and destroyed two apartments, one with explosives and the other by firing a tank shell. Malki said there appeared to be no apparent reason for the demolitions, since the owners of the building and the two apartment were not involved in anti-Israeli activities. Just before leaving, Israeli forces blew up the local Palestinian intelligence office.

The Israeli military had no comment, but said troops had found a bomb factory with grenades, vests for suicide bombers, explosives and weapons. As a result of the operation, a terror attack was prevented, the military said.

Also Friday, Israel asked the United Nations to postpone the planned visit of a fact-finding team to the Jenin refugee camp, but Secretary-General Kofi Annan said there was no reason for delay.

He said he expected the three-member team and its advisers to arrive in Israel on Saturday as scheduled. "I think our talks are going reasonably well," Annan told The Associated Press. "We are giving them the appropriate clarifications, and I do expect the team to leave tomorrow. I don't think there's any reason for further delay."

The group plans to investigate Israel's assault on the camp. Palestinians claim civilians were massacred. Israel claims it was a military operation aimed at Palestinian militants behind a string of suicide bombings against Israelis.