The security cabinet voted Wednesday to keep up the military pressure on Hamas in the Gaza Strip, but not to expand the operation.

However, it ordered the Israel Defense Forces to prepare and train for a larger operation, "should one be necessary."

The decision came on a day of heavy fighting in the northern Gaza town of Beit Hanun, in which one IDF soldier and seven Palestinians, most of them militants, were killed. The slain soldier was identified as Staff Sergeant Kiril Golenshein, 21, of Moshav Shekef.

The security cabinet also adopted a number of resolutions aimed at satisfying American requests in advance of Prime Minister Ehud Olmert's visit to Washington in another 10 days.

It decided to work to strengthen "elements in the Palestinian Authority other than the Hamas government," thereby effectively giving its approval to a plan by General Keith Dayton, the American security coordinator in the territories, to arm and train forces loyal to PA Chairman Mahmoud Abbas. Dayton wants to prepare Abbas' forces in Gaza for a confrontation with Hamas, which the United States believes is inevitable.

It also decided to give positive consideration to the PA's request to transfer thousands of rifles from Egypt and Jordan to Abbas' forces, as well as to America's request that Israel allow the Badr Brigade - a wing of the Palestine Liberation Army that is currently stationed in Jordan - to relocate to the territories. Israel has previously refused to admit the Badr Brigade, but Dayton wants to turn it into Abbas' rapid reaction force in Gaza.

However, both decisions require approval from both Olmert and Defense Minister Amir Peretz, and a source in Olmert's office said: "We don't see approval being granted just now."

Additionally, the cabinet agreed to "launder" the presence in the West Bank of some 5,000 Palestinians who hold American or European passports but returned to the West Bank after the Oslo Accords were signed. Because they had lost their residency permits due to long absence, they entered on tourist visas, but for years, these visas were automatically renewed.

Recently, however, the Interior Ministry has refused to renew them, resulting in many being "trapped" in Jordan, cut off from their jobs and families.

This development has elicited sharp protests from the U.S. and the European Union, and the coordinator of government activities in the territories, Major General Yosef Mishlav, therefore recommended giving them residency permits on a humanitarian basis.

Peretz approved this idea and forwarded it to the diplomatic-security cabinet, which ratified it Wednesday.

The forum also decided to expand cooperation with Egypt in an effort to prevent arms smuggling from Sinai into Gaza.

The cabinet received an intelligence briefing from Military Intelligence and the Shin Bet security service, both of which warned that Hamas is smuggling weapons into Gaza at an accelerated pace. They also said that the Strip was becoming increasingly politically radicalized.

IDF officers briefed the ministers on the army's operation in Gaza, but did not request that the operation be expanded.

Several ministers, including Benjamin Ben-Eliezer and Avi Dichter, criticized the IDF's plans for Gaza - which consist mainly of brief, temporary incursions into the Strip - terming them "more of the same" and demanding more creative ideas.

Minister Eli Yishai (Shas) reiterated his demand that the IDF reoccupy the Philadelphi Route, along the Gaza-Egypt border, to halt the arms smuggling. Minister Yitzhak Cohen (Shas) blamed the situation in Gaza on the unilateral withdrawal.

Newly appointed minister Avigdor Lieberman, attending his first meeting of the forum, said that Israel should act "like the Russians in Chechnya" and cultivate a friendly local leadership in Gaza. He argued that there was no point in toppling the Hamas government until there was something to put in its place.