Palestinian leader Yasser Arafat, meanwhile, said Israel's release of 334 prisoners — out of some 7,700 — fell far short of expectations.
Hundreds of police surrounded the hilltop shrine in Jerusalem's walled Old City on Thursday to keep out about 40 ultranationalist Jews.
The hilltop, once home to two biblical Jewish Temples, is now the location of the Al Aqsa Mosque, Islam's third-holiest shrine. Thursday was the annual day of fasting and mourning for the destruction of the Temples by invading armies.
Each year, police allow the Temple Mount Faithful group, which aims to rebuild the Temple in place of the mosque, to march to the gates of the mosque compound. This year, the marchers were joined by a lawmaker from Prime Minister Ariel Sharon's Likud party, who a day earlier was embarrassed by an Israeli TV presenter when he was unable to answer simple questions about the Jewish shrines.
The hill is being administered by the Supreme Muslim Council and has been closed to non-Muslims during nearly three years of Israeli-Palestinian fighting. On Sept. 28, 2000, Sharon — who was then the opposition leader in parliament — toured the site, a visit that was followed by days of rioting that widened into the current battle.
Several weeks ago, Israeli police had begun allowing small groups of tourists, including Jews, to again visit the site, drawing bitter Muslim complaints.
With the day of mourning approaching, police stopped the visits. On Wednesday, Israel's Supreme Court rejected an appeal by the Temple Mount Faithful to lay a cornerstone for a new temple on the hill.
In the West Bank town of Ramallah, Arafat criticized Israel's release of prisoners as insufficient. The acrimony over Wednesday's release underscored bitterness on both sides over the lack of progress along the road map peace plan, which is supposed to lead through three phases to a Palestinian state in 2005.
Palestinians have yet to disarm militants and Israel has not frozen construction in West Bank and Gaza Jewish settlements or dismantled most of the 100 smaller settlement outposts there.
On Thursday, the Maariv newspaper reported that Sharon supports a new proposal to allocate $95 million to settlements in the West Bank's Jordan Valley.
A spokesman for the prime minister refused to comment on the report, which said the money would be used to provide free housing to young couples moving to the area for at least four years. The fund would also go to college tuitions and provide grants of $2,700 to those who found jobs in the area.
The Palestinians have also been angrily protesting a barrier that Israel is building between its territory and the West Bank. Israel says it is a security measure to keep out suicide bombers; the Palestinians say it encroaches unacceptably on West Bank land.
On Wednesday, President Bush reiterated his criticism for the series of fences, razor wire and a concrete wall. "We're talking to Israel about all aspects of the fence," Mr. Bush told reporters in Crawford, Texas. "I made it clear I thought the fence was a problem, and so we're talking."
American officials are considering deducting the cost of the West Bank section of the fence from U.S. loan guarantees to Israel.
That would reprise an approach adopted by Mr. Bush's father, the earlier President Bush, who used loan guarantees to prod Israel to halt settlement construction in the early phases of peace talks.
On Tuesday, the United Nations Development Program announced it would try to raise $18 million in humanitarian assistance for Palestinian communities affected by the construction. The money would create 200,000 jobs and improve health care facilities in Palestinian areas isolated by the barrier.