Israel rebuffed calls by world leaders for a truce, and Hamas was cold to a cease-fire.
Instead, both intensified their fire. Israel bombed a mosque that it said was used to store rockets as well as vital smuggling tunnels along the Egyptian border, and the Islamic militants hammered southern Israeli cities with about 60 rockets.
Not only has Israel rejected international calls for a truce, it is continuing to amass its armored ground forces on Gaza's borders for the threatened invasion that may well be the next phase of this conflict.
The Israelis say until Hamas rockets stop landing in border cities like Sederot, they won't stop bombing Hamas, reports CBS News correspondent Mark Phillips. Sederot is a frequent Hamas target, where the bus shelters are also bomb shelters.
And despite the loss of civilian life the bombing has caused, Phillips reports, the Israelis say there's another reason they think it's too soon to stop.
"Terror cannot work," said Israel's Foreign Affairs Minister Tzipi Livni. "Targeting Israel doesn't mean that they are going to get something that even can be perceived as a victory."
Victory is just what Hamas leader Ismail Haniya promised tonight in a broadcast speech, Phillips reports. It is closer, he claimed, than some people may think.
Israeli troops trudged between dozens of tanks in muddy, rain-sodden fields outside of Gaza, assembling equipment, cleaning weapons and scrubbing the insides of tank barrels. Their commanders moved forward with preparations for a ground operation, said an Israeli defense official who spoke on condition of anonymity because of the sensitive nature of the information.
Meanwhile, the United Nations Security Council is planning emergency consultations to discuss an Arab request for a legally binding and enforceable U.N. resolution that would ensure an immediate cease-fire in Gaza.
Egypt's U.N. Ambassador Maged Abdelaziz said in a letter to the council president that the Arab Group at the U.N., which he currently chairs, was seeking an emergency session on "the continued Israeli military aggression" on instructions from Arab League foreign ministers.
Croatia's U.N. Ambassador Neven Jurica, the council president for December, scheduled emergency consultations Wednesday evening.
"Frustrated by the rejection of the ceasefire proposal, emergency Security Council consultations were called for Wednesday night, New Year's eve," says CBS News Foreign Affairs Analyst Pamela Falk. "At the request of Libya, a Council member, and Egypt, as Chair of the Arab Group at the U.N., with the possibility of having a formal open Security Council meeting, to discuss a binding Resolution demanding an immediate ceasefire in Gaza."
Diplomatic efforts by U.S., European and Middle Eastern leaders appeared to be having little effect. A French proposal for a 48-hour cease-fire to allow humanitarian supplies into Gaza failed to gain traction. Israeli Prime Minister Ehud Olmert said the time was not ripe to consider it. A separate proposal by Turkey and Egypt, two of Israel's few allies in the Muslim world, also seemed to be attracting little serious study in Israel or Gaza, where Hamas has also dismissed talk of a truce.
With a shrinking number of targets to hit from the air and top Hamas leaders deep in hiding, a ground operation seemed all the more likely. In five days of raids, Israeli warplanes have carried out about 500 sorties against Hamas targets, and helicopters have flown hundreds more combat missions, a senior Israeli military officer said on condition of anonymity in line with military regulations.
The government has approved the call-up of more than 9,000 reserves. Heavy cloud cover that could encumber ground forces was expected to lift Thursday.
U.N. humanitarian chief John Holmes said the death toll was estimated to range between 320-390, and injured from 1,500-1,900.
Between 20 percent and 25 percent of the dead are either women or children, said U.N. Relief and Works Agency commissioner Karen Abu Zayd.
Hamas says some 200 uniformed members of its security forces have been killed, and the U.N. says at least 60 Palestinian civilians have died.
In Israel, three civilians and a soldier have been killed by rocket fire, which has reached deeper into Israel than ever. The sites of the missile hits have drawn curious crowds.
In the Negev desert city of Beersheba, people visited a school where a rocket made a direct hit Tuesday evening, slamming through the ceiling and showering debris on students' desks. A visitor illuminated by a shaft of light through the hole in the roof said with some astonishment, "This is my daughter's seat."
In Gaza, the sites of airstrikes have also attracted the curious and the defiant, including a Palestinian man who planted a green Hamas flag atop a mound of debris at a flattened mosque, its minaret still thrusting toward a stormy sky.
The chief of Israel's internal security services, Yuval Diskin, told a government meeting that Hamas members are hiding inside mosques, believing they'll be safe from airstrikes and using them as command centers, according to an Israeli security official who spoke on condition of anonymity because he was not allowed to share the information.
Other militants were hiding in hospitals, some disguised as doctors and nurses, Diskin said, according to the official.
Echoing Israel's cool response to truce proposals, a senior Hamas leader with ties to its military wing said now was not the right time to call off the fight. Hamas was unhappy with the six-month truce that collapsed just before the fighting began because it didn't result in an easing of Israel's crippling blockade of Gaza.
Hamas spokesman Taher Nunu said that although Hamas leaders have been driven underground, the Gaza government was functioning and had met in the past few days.
"What our people want is clear: an immediate stop to all kinds of aggression, the end of the siege by all means, the opening of all border crossings, and international guarantees that the occupation will not renew this terrorist war again," Nunu said.
Israel's latest airstrikes have concentrated on crushing the many smuggling tunnels under Gaza's southern border with Egypt. They provide a crucial lifeline, not just for Hamas rulers, but also for bringing in food and fuel for Gaza's people.
Israel and Egypt blockaded Gaza after Hamas violently seized control of the territory in 2007 and have opened their borders only to let in limited humanitarian aid.
On Wednesday, several wounded Palestinians were taken across the Israeli and Egyptian borders for treatment, including a child bundled in blankets.
Gaza's southern smuggling zone was hit again in morning airstrikes that left vast craters over the collapsed underground passages.
Diskin, the Israeli security chief, told a Cabinet meeting that the tunnel network has been badly damaged. Israel says more than 80 tunnels were destroyed. Several hundred tunnels ran under the border before Israeli warplanes began striking.
Hamas was trying to smuggle some of its activists to Egypt through still-passable tunnels, Diskin said.
Israel fears that opening crossings would allow Hamas - which remains officially committed to Israel's destruction - to further strengthen its hold on the territory.
Moderate Palestinian President Mahmoud Abbas, a Hamas rival who controls only the West Bank, suggested he would not continue peace talks with Israel at any price. He said on Palestinian TV that the stalled negotiating process had become useless and was not reaching any of its goals - namely the creation of a Palestinian state.
"Negotiation is not a goal by itself; it's a tool," Abbas said. "Unless it is a tool to achieve peace ... there is no need for it to continue."
Gaza's militants fired dozens of rockets into Israel on Wednesday evening, including one in the city of Ashkelon that was caught on video. It showed a man on a sidewalk ducking for cover along a wall as the missile explodes in a cloud of smoke a few steps behind him.
The city of 120,000 people 11 miles north of Gaza has been a frequent target.
Israel's rescue service said it has responded to 250 rocket attack scenes since Saturday and treated 48 wounded, most of whom had light injuries.
School was canceled in much of Israel's south because of the rocket threat. The 18,000 students at Ben-Gurion University in Beersheba, southern Israel's only university, were also told to stay home.
Beersheba, 19 miles from Gaza, had never been within range of Gaza rockets, reflecting the increasing sophistication of what started out as homemade weaponry.
Now militants are firing weapons made in China and Iran that have dramatically expanded their range and put more than one-tenth of Israel's population in their sights, defense officials said.
In Gaza, two Palestinian medics were killed and two others were wounded when an Israeli missile hit next to their ambulance east of Gaza City, Palestinians said. The Israeli military said it did not know of the incident.