The dispute centers on the scope of the Israeli pullback, particularly whether Israel would remove the main army checkpoint at the entrance of town.
Plans to hand over Jericho and the town of Tulkarem later this week were announced Tuesday, after a meeting between Israeli Defense Minister Shaul Mofaz and Palestinian leader Mahmoud Abbas.
Security commanders met for just 20 minutes Wednesday to discuss the details of the Jericho handover. Ismail Jaber, the Palestinian commander, said disagreements remained, and that negotiations would continue. It was not clear when he would meet again with his Israeli counterparts.
Israeli forces had rarely operated in Jericho and Tulkarem in recent months. The Palestinians want surrounding areas to be included as well, but Israel has balked at removing major army checkpoints on the outskirts of these towns.
Palestinian officials said the differences were not resolved at Tuesday's meeting. "Without lifting the roadblocks, the handover will be meaningless," said Saeb Erekat, the Palestinian government's chief spokesman.
Israeli roadblocks are a key point for the Palestinians. Dozens of barriers have limited movement in and out of the towns, strangling social and economic life. Israel says the barriers are necessary for security.
In Jericho, the military is particularly adamant about keeping the main checkpoint in place because it wants to prevent Israelis from reaching a casino in the town. Casino gambling is illegal in Israel, and before the outbreak of Israeli-Palestinian fighting in 2000, the Jericho casino was packed with Israeli gamblers.
The casino was closed a month after the start of fighting, and the army barred Israelis from entering West Bank towns. If the Jericho checkpoint is removed, the army would not be able to enforce the ban.
Erekat said there are no plans to reopen the casino and that the main Palestinian concern is to revive the battered economy by improving movement. He also said Israeli leaders agreed at last month's Mideast summit in Egypt that the handover would include entire areas, including roadblocks.
"Yesterday, Abu Mazen raised this issue and showed him (Mofaz) the agreement in writing," Erekat said.
Israel has agreed to turn over five Palestinian towns, including Jericho and Tulkarem, to Palestinian control as part of a truce announced at the Feb. 8 summit in the Egyptian resort of Sharm el-Sheik. The handover has been held up, however, by a Palestinian suicide bombing that killed five Israelis in Tel Aviv on Feb. 25.
Palestinian Prime Minister Ahmed Qureia on Wednesday accused the Israelis of dragging their feet. "With the exception of yesterday's meeting, all the meetings so far did not lead to the implementation of the understandings reached at Sharm el Sheikh," he told his Cabinet.
The militant group Hamas, which has largely observed the truce, also expressed impatience, hinting it might resume attacks on Israeli targets unless there is progress soon.
"The Zionist occupation is running away from the conditions agreed upon to restore calm," the group said in a statement released in Gaza. "They will find themselves at a crossroads, and they will be held fully responsible for the consequences."
Abbas' meeting with Mofaz at the main crossing point between Gaza and Israel was the highest-level gathering of the two sides since the Tel Aviv attack.
Gilad, the Israeli defense official, said the Palestinians' ability to prove they can halt terror after the Jericho handover is a condition for transferring other West Bank cities. Jericho, an isolated oasis far from Israeli population centers, was relatively quiet throughout the 4½ years of violence.
Tulkarem, in contrast, is on the 1949 cease-fire line that marks the West Bank at Israel's narrowest point — 10 miles from the city of Netanya on the Mediterranean Sea. The Tel Aviv bomber came from Tulkarem.
In Tulkarem on Wednesday, residents eagerly awaited the handover.
"We're tired," said Jabar Azem, a militant who has lived in hiding from the Israelis for four years. He said his only plan after the handover is to rent an apartment and sleep in his own bed. "I won't leave that apartment. I just want to sleep peacefully," he said.
State prosecutor Talia Sasson presented her findings about the illegal outposts at a news conference Wednesday. She said "drastic steps" are needed to remedy the situation and safeguard Israel's democracy.
The study described the secret cooperation of various ministries and official institutions in channeling an undetermined amount of money to abut 95 outposts, which settlers began setting up more than a decade ago to break up the contiguity of Palestinian areas and prevent the establishment of a Palestinian state.
"Such a blatant violation of the law from so many different directions is liable to hobble Israel's democratic regime and must be redressed," Sasson said.
When asked specifically about the role of Prime Minister Ariel Sharon, once the leading settler patron, she demurred, saying her report didn't address individuals.
As foreign minister in 1998, Sharon had urged settlers to seize West Bank hilltops and establish outposts. One of the peak periods for outposts began after he became prime minister in 2001.