Israel plans to release 540 Palestinian prisoners in the coming week, 200 of them Islamic militants, reports CBS News Correspondent Robert Berger.
The government also tore down some troublesome West Bank roadblocks, and some 18,000 Gaza residents were being allowed to pass into Israel for jobs Monday. The moves were seen as attempts to counter Palestinian charges of Israeli recalcitrance in peacemaking.
Justice Minister Tommy Lapid voted for the prisoner release, but says he had mixed feelings.
"We are not very happy about it because they may return to acts of terror," he said.
But he said Israel wants to give the peace process a boost.
Islamic militants rejected the Israeli gesture. They demanded the release of all 6,000 Palestinian prisoners in Israeli jails.
Meanwhile, Israeli police Monday found the body of a soldier who had been missing for a week, Israeli media reported.
The body of Cpl. Oleg Shaichat was found in an olive grove between the Arab villages of Kafr Kana and Mashad in the north of Israel, according to Haaretz newspaper.
Police had said they were looking into the possibility that Shaichat had been kidnapped by militant groups, but Israeli Defense Minister Shaul Mofaz refused to speculate Monday on the circumstances of his death.
"I don't want to reach any conclusions until we have studied all the evidence," Mofaz told the Israeli Army radio.
The discovery may cast a pall over this week's talks in Washington between Israeli and U.S. officials.
Palestinian Prime Minister Mahmoud Abbas presented a list of complaints against the Israelis in a meeting Friday with Mr. Bush, ahead of Sharon's Tuesday visit to the White House.
Sharon was to meet Monday with American Jewish leaders.
Abbas cited Israel's refusal to free thousands of Palestinian prisoners. He also called for a halt to construction work on settlements in the West Bank and to a wall separating the West Bank from Israel.
Supplying Sharon with some capital to expend during his White House talks, his first since October last year, the Cabinet reversed an earlier position and agreed to free some imprisoned members of the violent Hamas and Islamic Jihad, the two groups responsible for almost all of the nearly 100 suicide bombing attacks that have killed more than 300 Israelis in 33 months of violence.
A senior Israeli official traveling with Sharon said that about 540 prisoners would be released within a week — about 210 from the Islamic groups, a similar number from Fatah, headed by Yasser Arafat and Abbas and the remainder common criminals.
The official, speaking on condition of anonymity, said the Cabinet decision did not quote numbers of prisoners to be released; rather, criteria for deciding who was eligible.
However, the decision did not appear to satisfy many.
Palestinian officials said that of the thousands of prisoners Israel is holding, 3,000 could be freed with no threat to Israel's security.
Hamas leaders threatened to renew attacks against Israelis unless all prisoners were released.
Hardline members of the Israeli Cabinet denounced the decision, approved by a vote of 14-9. The released prisoners "may return to acts of terror," warned Housing Minister Effie Eitam of the hawkish National Religious Party.
Lapid said the Islamic militants to be freed were in administrative detention — imprisonment without trial. "They belong to those groups (Hamas and Islamic Jihad), but were not personally accused of murder or anything like that," Lapid told Israel TV.
Israel has also pledged to withdraw from two additional West Bank towns, and on Sunday dismantled three West Bank roadblocks. At a roadblock outside Ramallah, a crowd of Palestinians cheered as an Israeli bulldozer cleared huge cement blocks from the road.
The roadblocks, in place since the beginning of the violence in September 2000, have severely restricted movement in the West Bank, crippling the economy and causing severe hardships. Israel has said the roadblocks are necessary to stop attackers.
Government spokesman Avi Pazner said the steps would demonstrate to Mr. Bush Israel's determination to move ahead with the "road map" peace plan. He added, however, that Sharon would make the argument that the next step was up to the Palestinians.
The road map calls for other Israeli moves — such as a complete freeze on construction in Jewish settlements in the West Bank and Gaza and a dismantling of all the outposts erected throughout the West Bank since 2001. Israel is also supposed to gradually withdraw from all the autonomous areas is has seized.
Sharon's position is that taking any further steps is too risky while Israel still faces the threat of attack — meaning that first the Palestinians must disarm militant groups, as called for in the road map.
Interviewed on Israel TV on Sunday, the Israeli army chief of staff, Lt. Gen. Moshe Yaalon, said, "The critical thing is dismantling the terror groups. If this is not done, I predict a resumption of terror attacks."
The missing soldier, Shaichat, was in uniform and armed when he was last seen by a fellow hitchhiker traveling in a car near the biblical village of Cana in the Galilee, on his way to his home in a nearby Jewish satellite of Nazareth, Israel's largest Arab city.
The disappearance came as security officials have warned they have intelligence warnings of Palestinian militants' intentions to kidnap Israeli soldiers.
Shaichat was last seen about 15 miles from the West Bank. No public ransom demands or claims of responsibility, however, had been made in the case.
The Israeli military recently restated a long-standing order forbidding soldiers from hitching rides with strangers following the July 11 abduction of an Israeli taxi-driver by Palestinians. The cabbie was later freed by Israeli commandos.
That kidnapping happened despite a June 29 cease-fire by Palestinian militants. Israeli and Palestinian officials later said that the kidnappers operated independently of main militant groups.