Israel's army chief said the offensive in Lebanon will not end until Israel's security is restored, and he vowed to destroy Hezbollah's arsenal and military capabilities.
How much of the guerilla group's arsenal remains is in question. It is believed that Hezbollah had about 13,000 Katyusha-type rockets at the beginning of this round of conflict.
Shaul Mofaz, a former Israeli defense minister, said on Israel's Army Radio that about 50 percent of Hezbollah's arsenal of weapons and buildings has been destroyed by the Israeli offensive. Israeli Brig. Gen. Alon Friedman gave the same estimate on Wednesday.
But, CBS News National Security Correspondent David Martin reports that U.S. intelligence estimates that only a third of the weapons have been fired or destroyed by Israeli bombardments.
Appearing on Al-Jazeera on Thursday afternoon, Hezbollah leader Sheik Hassan Nasrallah denied Israeli claims that 50 precent of his guerrillas' rocket arsenal has been destroyed.
"Hezbollah has so far stood fast, absorbed the strike and has retaken the initiative and made the surprises that it had promised, and there are more surprises," he said, warning that a Hezbollah defeat would be "a defeat for the entire Islamic nation."
Israeli Brig. Gen. Ido Nehushtan said that Hezbollah has fired more than 1,100 rockets at civilian areas in Israel since the fighting began and that 12 percent - or about 750,000 people - of Israel's population lives in areas that can be targeted by the guerrillas.
"The fighting in the north ... could last much longer," Lt. Gen. Dan Halutz, the army's chief of staff, said in a letter to soldiers and officers. "We are being tested at this time. Our moral strength and value will reflect on the state of Israel and its residents, and on their ability to continue to stand up to the threat on the front."
"We will operate for as long as necessary until security is returned to the state of Israel," he added.
At least 306 people have been killed in Lebanon since Israel's campaign began, according to Lebanese officials. At least 29 Israelis have been killed, including 14 soldiers. Hezbollah guerrillas fired 25 rockets into Israel on Thursday. The attacks caused no casualties.
Israel warned residents to "immediately" flee a nearly 20-mile swath of south Lebanon along the border. Its warplanes also launched new airstrikes on Beirut's southern suburbs, a Hezbollah stronghold, shortly after daybreak, followed by strikes in the guerrillas' heartland in the south and eastern Bekaa Valley.
The planes also bombed large parts of the south, from which Hezbollah guerrillas fired more rockets into Israel. On Wednesday, Israeli bombings killed as many as 70 people, according to Lebanese television, making it the deadliest day since the fighting began July 12.
A large fight between Israeli forces and Hezbollah guerrillas broke out Thursday evening on the Lebanese side of the border, the Israeli army said, adding that its troops suffered casualties but did not elaborate. Hezbollah's Al-Manar television said three Israeli soldiers were killed and 10 wounded in fighting.
The forces crossed the border as part of ongoing operations to push back Hezbollah guerrillas who have continued firing rockets into northern Israel despite more than a week of massive bombardment. Israel has mainly limited itself to attacks in Lebanon from the air and sea, reluctant to send in ground troops on terrain dominated by Hezbollah.
But an Israeli army spokesman refused to rule out the possibility of a full-scale invasion. Israel broadcast warnings Wednesday into south Lebanon, telling civilians south of the Litani River to "leave their areas immediately for their own safety" — a possible prelude to a larger ground operation.
"There is a possibility — all our options are open. At the moment, it's a very limited, specific incursion but all options remain open," Capt. Jacob Dallal, an Israeli army spokesman, told The Associated Press on Wednesday.
U.S. intelligence sources don't believe the Israelis will launch a full-scale invasion, Martin reports.