HIGHLIGHTS: Curfew Lifted in Bethlehem||Withdrawal from Gaza & Bethlehem Expected within 48 Hours||Security Talks at Lower Military Level to Begin in Coming few Days||Occupation Troops Wound a Palestinian as they Re-enter West Bank City of Nablus & Arrest Another at the City's Balata Refugee Camp||Abu Nidhal, Leader of Breakaway Fatah Revolutionary Council Found Dead with Gunshot Wounds in Baghdad 3 Days Ago|| STORY: Palestinian militant groups rejected on Monday a new deal to ease Israel's military clampdown in the Gaza Strip and a West Bank city in return for a reduction of violence, dimming hopes for a lasting cease-fire.

The agreement was sealed in a meeting on Sunday between Israeli Defense Minister Binyamin Ben-Eliezer and a Palestinian delegation headed by Interior Minister Abdel Razzak al-Yahya and President Yasser Arafat's security adviser, Mohammed Dahlan.

The deal, which would call for an Israeli pullout from Bethlehem and parts of Gaza, yielded the first significant progress in months toward staunching nearly two years of bloodshed in which at least 1,503 Palestinians and 588 Israelis have died.

But Palestinian Resistance groups including Hamas, Islamic Jihad and the Popular Front for the Liberation of Palestine said they rejected even a limited cessation of their 22-month-old uprising against Israeli occupation and would continue to mount attacks.

"The resistance will find ways to pursue the fight without clashing with the Palestinian Authority," senior Hamas official Abdel-Aziz al-Rantissi told Reuters. "Our rifles will remain directed against the Zionist enemy and only against the Zionist enemy."

Islamic Jihad leader Abdallah al-Shami called the move a "political gamble." Both groups have led a campaign of Resistance bombings which have killed scores of Israelis in the uprising.

Israel's Defense Ministry said in a statement issued late on Sunday, after nearly four hours of talks at a Tel Aviv hotel, that "both sides agree to start implementing the initiative Monday in Gaza and Bethlehem."

It said under the deal, the Palestinians would "take responsibility to calm the security situation and reduce violence and terror" and Israel would "do everything in order to ease conditions on the Palestinian population."

ISRAEL EXPECTED TO PULL OUT FROM GAZA & BETHLEHEM WITHIN 48 HOURS

Sources from both sides gave few details, but a senior adviser to Arafat said that under the deal Israeli forces were to pull out of Bethlehem and some areas they occupy in Gaza "in the next 48 hours."

"The Palestinian national security forces will be deployed (in those areas)," the adviser, Nabil Abu Rdainah, told Reuters. "This step will be followed by more steps in the next few days for a withdrawal (by Israel) from all cities."

Israeli officials have given no concrete indications of when the Gaza-Bethlehem pullout would take place or whether additional withdrawals were being considered.

CURFEW LIFTED IN BETHLEHEM

In Bethlehem, the Israeli army lifted its curfew on the city until the evening. Residents said few troops were seen during the daylight hours and tanks remained on the outskirts of the city, suggesting a pullout might not involve large forces.

Palestinian sources said a pullback in Gaza would require Israeli forces to open the main roadway, which has been severed in several places by army checkpoints, and also leave "buffer zones" they have set up near at least five Gaza towns.

Israel reoccupied seven West Bank cities in June following a spate of Resistance bombings by Palestinian Resistance activists.

NEW ROUND OF SECURITY TALKS AT LOWER-RANKING MILITARY LEVEL TO BEGIN IN NEXT FEW DAYS

The Defense Ministry said the sides also agreed to a new round of security talks by lower-ranking military officers in the West Bank and Gaza Strip in the next few days.

"The importance of the initiative is that it will build trust for both sides, which is essential for any future security and diplomatic steps," the ministry quoted Ben-Eliezer as saying.

The evening talks in Tel Aviv were the first since August 7, when top security officials on both sides failed to agree on Ben-Eliezer's plan to ease a military clampdown in the fenced-in Gaza Strip as a test case before expanding it to the West Bank.

Palestinian security officials had demanded at least one West Bank city be included in the pilot plan and on Sunday, Ben-Eliezer said he was willing to consider expanding what he calls the "Gaza first" proposal to West Bank cities.

PALESTINIAN WOUNDED AS OCCUPATION ARMY RE-ENTERS NABLUS' OLD CITY

A Palestinian was meanwhile critically wounded by gunfire in fierce clashes that broke out as the Israeli occupation army pushed into the old city of Nablus.

Saleh Ashiya, 19, was hit as a gunbattle broke out between occupation troops and armed Palestinians , Palestinian medical sources said Monday.

Palestinian security sources said the occupation army had destroyed two flats and three shops in the old city, or casbah, by placing explosives in the buildings.

An occupation army spokesman confirmed that the occupation army had moved into the old city at around midday, saying occupation troops had blown up an explosives lab there.

Israeli occupation troops also moved into Balata refugee camp in the south of the city. They arrested Mahmud Jabaara, 27, a senior official of the Al-Aqsa Martyrs Brigades, an armed offshoot of Yasser Arafat's Fatah movement, a spokesman for the group said.

ABU NIDHAL, LEADER OF BREAKAWAR FATAH REVOLUTIONARY COUNCIL FOUND DEAD OF GUNSHOT WOUNDS IN BAGHDAD 3 DAYS AGO

Palestinian breakaway Fatah commander Abu Nidal, one of the world's most wanted men, has been found dead in his Baghdad home with gunshot wounds, Palestinian sources in Ramallah said Monday.

Abu Nidal, 65, a sworn enemy of Yasser Arafat and any Palestinian leader who sought accommodation with Israel, led a dissident Palestinian militant organization high on Washington's list of groups considered terrorist.

It was blamed for attacks in 20 countries in which hundreds of people were killed or wounded, mostly during the 1970s and 1980s.

A senior Palestinian official said Abu Nidal had died under "mysterious conditions" and it was unclear whether he was killed or committed suicide.

Senior Palestinian sources said they could confirm a report in the Palestinian Al-Ayyam newspaper which said Monday Abu Nidal's body had been found with gunshot wounds and that he died three days ago. The reports could not be independently verified.

Born in the Mediterranean port town of Jaffa to wealthy Palestinian parents, Abu Nidal and his family were driven out to the West Bank during the 1948 Middle East War which accompanied Israel's creation.

Driven by a hatred of Israel and of Arabs willing to seek a political settlement with the Jewish state, Abu Nidal's group waged a bloody guerrilla war across three continents with killings, bombings and hijackings.

An early incarnation of his group was blamed for killing PLO representatives in London, Paris, Rome, Madrid, Brussels and Kuwait and for bombing a PLO office in Islamabad, killing four people.

He was sentenced to death in absentia by a Fatah military court. In 1982, his group tried to assassinate Israel's ambassador to Britain, setting off Israel's invasion of Lebanon to root out Palestinian guerrilla groups.

In 1984 a Jordanian airliner was attacked with a rocket while taking off from Athens.

Assassinations included a Jordanian diplomat in Ankara, the British cultural attache in Athens and the British Deputy High Commissioner in Bombay

PHOTO CAPTION

Yossi Beilin, a member of Israel's Parliament (Knesset) and one of the Oslo agreement architects, left, and Palestinian Information Minister Yasser Abed Rabbo, right, take questions at a joint news conference following a meeting between Israeli and Palestinian peace activists in the outskirts of Jerusalem Sunday Aug. 18, 2002. (AP Photo/Lefteris Pitarakis)
- Aug 18 10:49 AM ET

( R ) Abu Nidal, pictured in this 1982 file photo, was found dead from gunshot wounds in his Baghdad residence, senior Palestinian sources said August 19, 2002. The militant leader, Sabri al-Bana, was widely known by his nom de guerre Abu Nidal as the head of the Fatah-The Revolutionary Council group that broke with the Palestine Liberation Organization in 1974, saying it was too moderate. (Reuters - Handout