CBS News Correspondent Robert Berger reports that Palestinian Prime Minister Mahmoud Abbas cancelled Wednesday's planned summit meeting with Ariel Sharon. Abbas is angry about Israel's decision to release around 350 Palestinian prisoners, far less than the thousands he's demanding.
Palestinian sources also said that Israel's list of those to be released contained few long-serving detainees.
Israel, for its part, says it won't make broader concessions until the Palestinians crack down on terrorist groups.
Israeli media had reported that Israel also had canceled the meeting, planned to coincide with the prisoners' release on Wednesday, because of the shooting attack. But a senior Israeli source, speaking on condition of anonymity, said Israel had not pulled out.
Sharon and Abbas last met on July 20, before their separate talks with President Bush in Washington, and said then that they would meet again afterward. The cancellation is a further delay in peace moves.
Palestinian legislator Saeb Erekat called for U.S. intervention to avert "the development of a major crisis" in the peace process. He said the only way to defuse the crisis was "with the intervention of the American administration to ensure the implementation of the first phase of the road map."
Sunday night's shooting attack on an Israeli car near Bethlehem was the latest violence to mar a cease-fire by Palestinian militants declared on June 29. It was the first attack in the Bethlehem area since Israel handed the town over to Palestinian security a month ago as part of the peace plan.
A mother and her 9-year-old daughter were badly wounded in the ambush, and two other children were slightly injured. In response, Israel said it would not transfer more areas to Palestinian control until the gunmen were apprehended.
Militants from the Al Aqsa Martyrs' Brigades, a violent group affiliated with Palestinian leader Yasser Arafat's Fatah movement, claimed responsibility. The group is composed of loosely linked bands of militants throughout the West Bank.
Under the road map, which aims to end violence and establish a Palestinian state by 2005, Israel is supposed to withdraw gradually from Palestinian areas it occupied during the last three years of fighting. The Palestinians are supposed to disarm militant groups — something Abbas is reluctant to do for fear of sparking a civil war.
He prefers to negotiate an end to violence. The June 29 cease-fire by the three main Palestinian militant groups was the result of such talks.
The new Israeli condition stepped up pressure on Abbas to move against the militants. On Monday, Palestinian Foreign Minister Nabil Shaath condemned the attack, but added that his government's forces were too weak to be immediately effective in the West Bank, where the Israeli military has a large degree of control.
On Monday, Israel published a list of 342 security prisoners and 97 criminal inmates it plans to free, including some members of Islamic militant groups Hamas and Islamic Jihad.
The prisoners have become a major bone of contention, although the issue is not directly addressed in the road map. The Palestinians want Israel to release thousands of the approximately 7,700 prisoners it holds. Israel has agreed to release some militants, but refuses to free anyone implicated in attacks on Israelis.
Palestinian leader Yasser Arafat scoffed at the announcement.
"What is this? Deception?" he said Monday.
On Tuesday, Israeli soldiers detained 47 Palestinians and foreign activists who were protesting the construction of an Israeli "security fence" near the West Bank town of Qalqilya, the pro-Palestinian International Solidarity Movement said.
Israeli military sources said the protesters were arrested after refusing to leave a closed military zone and had been handed over to police.
Palestinians strongly oppose the planned 380 mile-barrier, which is under construction. Israel says it is needed to stop suicide bombers from entering Israel. The fence cuts deep into the West Bank in places to include Jewish settlements on the Israeli side.
Israeli security officials said Monday that Israel was considering moving the fence because of U.S. pressure and Palestinian complaints, leaving most Jewish settlements on the Palestinian side.
In talks in Washington last week, Sharon heard U.S. concerns that despite Israeli declarations that the barrier would be only a security device, the route of the barrier would be perceived as a political border, pre-empting negotiations.
Israeli officials said no decision to change the plan has been made.
On Monday, U.S. officials said they are considering a reduction in loan guarantees to Israel as a penalty for constructing the fence. Congress authorized more than a decade ago cuts in U.S. aid to Israel by the amount the Jewish state spent on settling Jews on the West Bank and in Gaza.
Also Tuesday, a Palestinian boy died in a Gaza Strip hospital after an explosive device went off in his hands, hospital sources said. Details of the incident and the boy's name and age were not immediately available.
In another incident, three children were moderately wounded in the southern Gaza town of Khan Younis when an explosive device blew up while they were playing with it, hospital officials said.