Despite the crackdown, high-level talks between Israel and the Palestinians were expected next week - including a possible meeting involving Prime Minister Ariel Sharon, officials and Israeli news reports said.
In Nablus, bulldozers piled up soil and rubble to block the entrances to the Old City while tanks and armored vehicles crawled through its empty streets, enforcing a strict curfew on the city of about 150,000.
Witnesses said several people were arrested Saturday in addition to the 50 rounded up Friday, the first day of the army crackdown which followed two bombings in Jerusalem last week.
Armed with hammers and metal bars, Israeli soldiers wound through the casbah's narrow alleys, opening shuttered shopfronts and searching houses. In one instance, filmed by Associated Press Television News, a Palestinian man led the way as troops entered an alley and searched a shop.
The circumstances of the search weren't clear. Palestinians and human rights groups have accused Israeli troops of forcing Palestinian civilians to lead troops in potentially dangerous searches - a charge Israel has denied.
An army spokesman, Olivier Rafowicz, denied the man was being used as a human shield and said the search was part of Israel's ongoing war on terrorism.
"The army is acting with the utmost caution in order to differentiate between innocent civilians and terrorists," he said.
Elsewhere, Israeli troops shot dead a Palestinian in the West Bank city of Hebron, Palestinian witnesses said. They said the troops were reimposing the curfew at the end of the day and shot 40-year-old Abdel Rahim Tawil in the head while he was driving a truck. The army said it was checking the report.
The remains of American student Marla Bennett, 24, of San Diego, California, who was killed in Wednesday's bombing at Jerusalem's Hebrew University, were to be returned to the United States early Sunday. The flight was supposed to leave late Saturday but was delayed.
The bodies of two other Americans were returned Friday, while an Israeli-American was buried in Jerusalem. The remains of an American-French citizen were to be sent to France on Monday.
The five, as well as two Israelis, were killed when a bomb exploded in the cafeteria of Hebrew University's Mt. Scopus campus.
The militant group Hamas claimed responsibility for the attack, saying it was revenge for an Israeli airstrike on Gaza that killed Hamas' military leader and 14 others, nine of them children.
Israeli officials say Nablus has replaced nearby Jenin as the main hub of Palestinian terrorist cells responsible for attacks in the past two weeks.
Despite the recent attacks and Israel's stepped-up siege, Israeli officials suggested Saturday that Sharon could meet with the new Palestinian interior minister, Abdel Razak Yehiyeh. "It could be, it depends on the developments in the situation," said Sharon's spokesman, Raanan Gissin.
Israel's Channel Two television and Army Radio said the meeting could come next week.
Yehiyeh, meanwhile, said he also planned to meet with Israeli Defense Minister Binyamin Ben-Eliezer before a Palestinian delegation including Yehiyeh heads to Washington on Wednesday for talks.
A Ben-Eliezer spokesman, Yarden Vatikai, said talks on implementing cease-fires in certain Palestinian areas could occur in coming days.
Sharon hasn't met with top Palestinian officials for months, although his dovish foreign minister, Shimon Peres, has held several meetings recently with Yehiyeh and the new Palestinian finance minister, Salam Fayed.
Peres, meanwhile, plans to meet with Egyptian President Hosni Mubarak on Monday in Cairo, a Peres adviser, Yoram Dori said.
Secretary of State Colin Powell said on Saturday he still hoped to meet Palestinian leaders next week despite the Hebrew University attack.
Powell condemned Palestinian attacks and mourned the five Americans and two Israelis who died in the Wednesday blast, but said efforts to end 22 months of bloodshed must continue.
"We can't walk away from it. We must continue to try to find a path forward," Powell told a news conference in Manila near the end of an eight-nation Asia tour. He made clear that no dates or participants for any peace effort had been set.
Nablus has been under an Israeli military curfew for most of the past six weeks, along with other Palestinian population centers occupied after back-to-back suicide bombings in Jerusalem killed 26 people.
Nablus residents defied the curfew from Sunday to Wednesday, but the military reinforced it on Thursday after the Hebrew University bombing.
Early Friday, more than 100 tanks and armored personnel carriers rolled into the city and soldiers began searching houses, arresting about 50 people.
The military said it found and blew up two buildings in the Old City that were being used as explosives laboratories.
One of the houses belonged to Hiba Atari, 21, and her husband, Ibrahim, a fugitive member of Palestinian leader Yasser Arafat's Fatah movement who is wanted by Israel.
Walking amid the rubble of her home on Saturday, holding the youngest of her three children, Hiba Atari said troops came to the home Friday morning, told her they would destroy it, and then detained her for several hours.
"The Israelis handcuffed me and blindfolded me and took me to an army base," she said. "There they were asking me about my husband the entire time."
"The entire day I was thinking about my girls. I didn't know where they were staying and if they had anything to eat," she said, adding that the girls, aged 1-4, were with a neighbor.
Also Saturday, a former Arafat adviser, Bassam Abu Sharif, launched a political party he said would promote democracy, implement reforms in the Palestinian government and fight corruption.
The Palestine Democratic Party would serve as "constructive opposition" to the Palestinian Authority, Abu Sharif said from Amman, Jordan, where the initiative was launched.
Washington has demanded a change in the Palestinian leadership and a host of reforms, and has refused to deal personally with Arafat.
Palestinians have said they would hold elections in January, but so far no one has emerged as a major threat to Arafat himself.