HIGHLIGHTS:  Conflicting Israeli & Palestinian Accounts of Progress on Standoff at Bethlehem||Deal Similar to the Arafat-Release Agreement, Palestinian Sources||Two Palestinians Killed in Gaza; One, in Tulkarm||Sharon's Dossier on Arafat Terror Link, Bag of Lies, Say Palestinians||STORY: Palestinian and Israeli officials gave conflicting accounts about talks underway in Jerusalem to resolve the 35-day standoff at the Church of Nativity in Bethlehem. Hassan Abed Rabbo, a senior member of in Palestinian leader Yasser Arafat's Fatah party said a deal has been struck adding that it consists of six to eight people to be (deported to) Italy and more than 30 to Gaza. According to Mr. Abed Rebbo those sent to Gaza could be imprisoned under the watch of American and British jailers in a deal similar to one brokered last week, which facilitated an end to Arafat's confinement.

But Israeli Defense Ministry spokesman Yarden Vatikay denied that a deal had been reached. "There is no agreement yet," he told The Associated Press. "They are negotiating our demands for people to be deported." He would not comment on the details under discussion.

Palestinian officials said the accord was worked out with representatives from the United States, Britain, the Vatican and the European Union.

In the wake of last month's large-scale Israeli military offensive in the West Bank, Bethlehem is the only Palestinian city still occupied by Israeli troops who arrested 13 people there late Sunday, including a local Hamas leader. A deal would likely mean an end to the Israeli presence in the city. But brief incursions and raids into Palestinian cities and towns continued.

MORE PALESTINIANS KILLED

Early Monday, two Palestinians were killed and two Israeli occupation soldiers wounded after an hours-long firefight in a citrus grove near the Gaza Strip. Israel claimed the two Palestinians, armed with guns and grenades, infiltrated Israel and attacked the soldiers before they were eventually shot and killed by the troops.

In another incident, Israeli occupation troops shot and killed a 9-year-old Palestinian boy in the Tulkarm refugee camp in the West Bank. Residents said the occupation soldiers shot from machine guns mounted on tanks situated at the entrance to the Palestinian-controlled camp after an incursion into the town earlier in the day.

Israeli occupation forces briefly moved into the Tulkarm refugee camp. Five Palestinian were arrested.

FORGED DOCUMENTS

Israeli Prime Minister, Ariel Sharon left Sunday for the United States with a 91-page booklet of documents that Israel claims prove Arafat is directly involved in funding terrorists.

Palestinian Information Minister Yasser Abed Rabbo labeled the booklet "ridiculous" and said that all the documents "were forged.

One document is a request for funding for militants including Raed Karmi, head of the Al Aqsa Martyrs Brigades, responsible for dozens of attacks against Israel. On the document Arafat writes, "Allocate 600 US dollars for each one," and signs his name.name.

Palestinians say the money was for political and social activities, not attacks. Karmi was killed Jan. 14 in an explosion widely attributed to Israel.

PHOTO CAPTION

An Israeli occupation soldier, back dropped by a tank parked at Manger Square, runs to a new position in the Old City of the West Bank town of Bethlehem where the Church of the Nativity, is located Sunday May 5, 2002. Israelis and Palestinians held high-level talks Sunday in an intense but so far unsuccessful effort to end a standoff at the Church of the Nativity, (APPhoto/Lefteris Pitarakis)