CBS News Correspondent Robert Berger reports that about 340 Palestinian security prisoners are on their way home, in what Israel describes as a goodwill gesture.
But Palestinian officials say it's a public relations ploy; they're demanding amnesty for thousands of prisoners. Israel says terrorists with blood on their hands will remain in jail. In response, they canceled a leaders' summit and called for U.S. intervention to prevent a crisis in peace efforts.
The Israeli government said it would release the prisoners at several checkpoints at 7:30 a.m. EDT.
Israel is holding about 7,700 prisoners, and Palestinians demand that Israel free thousands of them.
But the disagreement goes deeper than that. Palestinian leader Yasser Arafat called the release a "deceit," referring to the fact that most of the prisoners to be freed had nearly completed their terms.
There was also some criticism in Israel. In an analysis in Haaretz newspaper, headlined "A trawl through the prisons to net the smallest fry," said the list did not include any big names.
On the other hand, families of victims of Palestinian terror attacks appealed to the Israeli Supreme Court to block the release. The court turned down the appeals.
The list includes 443 prisoners. Most were to be freed Wednesday, but about 100, convicted of crimes, would be released later, officials said. Israel has noted that releasing prisoners is not part of the U.S.-backed "road map" peace plan, but the issue has become an obstacle to implementing the blueprint.
Almost daily, there are Palestinian demonstrations demanding freedom for prisoners, and Palestinian Prime Minister Mahmoud Abbas has adopted the cause.
Abbas was to meet Israeli Prime Minister Ariel Sharon on Wednesday, but called off the summit, mostly because of the prisoner dispute. Palestinian Foreign Minister Nabil Shaath explained that no results were assured. "We don't want meetings for the sake of meetings," he told The Associated Press.
Abbas met late Tuesday in Gaza with the heads of the violent Islamic groups, Hamas and Islamic Jihad. They declared a three-month halt to attacks against Israelis on June 29. Fatah, headed by Arafat and Abbas, declared a six-month truce.
Shaath said Abbas would try to persuade the militants to extend the truce. However, spokesmen from the Islamic groups said they did not discuss that, charging Israeli violations.
Islamic Jihad spokesman Nafez Azzam backed Abbas decision to call of his meeting with Sharon. "There is no reason to have meetings with the Israelis while they are continuing their aggression against our people," he said.
With the cancellation of the summit and tension rising, Palestinian legislator Saeb Erekat, a leading spokesman for the Palestinians, called for U.S. involvement to avert "the development of a major crisis."
"I believe that the only way to defuse this crisis is with the intervention of the American administration to ensure the implementation of the first phase of the road map," he said.
U.S. envoy John Wolf has been in the region since Friday, meeting with Israeli and Palestinian security officials. A U.S. government official said that Assistant Secretary of State William Burns will be arriving next week. But the official, who spoke on condition of anonymity, said no other high-level visits were planned even though the peace plan was encountering "very rough going."
Both sides have not carried out obligations. For example, the Palestinians have not moved to disarm militants, and Israel has not frozen construction in Jewish settlements in the West Bank and Gaza or dismantled dozens of unauthorized outposts. Israeli troops also remain in control of most West Bank towns and maintains dozens of roadblocks, stifling West Bank life.
However, early Wednesday Israeli forces scuffled with settlers while removing small unauthorized settlement outpost in the divided West Bank city of Hebron, the army and police said.
Ten settlers, including seven minors were arrested for resisting the evacuation, police spokesman Doron Ben-Amo said.
Also Tuesday, a senior Israeli security official said that Iran is behind many of the Palestinian attacks in defiance of the truce. The official, speaking on condition of anonymity, said Iran funds and controls renegade cells of the Al Aqsa Martyrs Brigades in the northern West Bank.
The official said that since the June 29 truce, Israeli security has foiled 38 terror attacks and arrested 75 Palestinian suspects.
On Wednesday, a car bomb exploded in Tel Aviv, killing one person and injuring several others. Police said the motive was criminal not terrorism.
The blast rocked Herzl Street, a mixed commercial-residential thoroughfare in the south of the city. Rescue workers said a 58-year-old man was critically wounded and later died. Eight people were lightly hurt.
"It's not a terrorist attack," said Tel Aviv police spokeswoman Slomit Holtzberg. "We know the people involved."