Officials in Hamas have said that the creation of the new Palestinian unity government and the release of abducted Israel Defense Forces soldier Gilad Shalit are in no way connected to one another, Israel Radio reported Monday.

Palestinian Authority Chairman Mahmoud Abbas told Prime Minister Ehud Olmert during their meeting Sunday that he would make an effort to secure the release of Shalit as soon as possible, and perhaps before the formation of the new PA unity government.

Olmert and Abbas met face to face in the Prime Minister's Residence Jerusalem for more than two hours Sunday.

According to the Prime Minister's Office, the meeting was conducted in a "positive atmosphere" and dealt primarly with ongoing issues.

The two leaders agreed to continue meeting on a regular basis in order "to discuss issues related to security, the war on terrorism, and improving the conditions in which Palestinians live," the PMO said.

Senior Abbas aide Mohammed Dahlan said the meeting was difficult and produced no agreements.

Dahlan said the Palestinians called on Olmert to ease travel restrictions in the West Bank by removing roadblocks, and to release sick and elderly Palestinian prisoners in Israeli jails, but Olmert made no promises.

The prime minister promised that, beginning at the end of the month, the Karni goods crossing would begin operating on extended hours in order to handle of the transport of goods into and out of the Gaza Strip without delays.

Olmert reiterated his commitment to the two-state solution, in accordance with his Sde Boker address several months ago.

According to PMO sources, Abbas told the prime minister that he supports the three principles laid out by the so-called Quartet of Middle East negotiators, according to which the PA government must recognize Israel, renounce terror and abide by prior agreements.

The PA chairman also accepted Israel's security demands, namely the release of Shalit, a halt to the ongoing Qassam rocket fire, and prevention of arms smuggling into the Gaza Strip.

Abbas asked Olmert to uphold the Gaza cease-fire, although he agreed that the truce is dependant on the actions of the PA.

Olmert told Abbas that Israel would not discuss expanding the truce to the West Bank until it is fully implemented in the Gaza Strip.

The prime minister also told Abbas that not only would Israel not recognize the PA unity government unless it agrees to the Quartet demands, Israel would not hold contacts with Fatah ministers serving in the unity government. In essence, Olmert told Abbas not to appoint Fatah officials who are in contact with Israel, in order to prevent the contacts from being terminated.

Olmert also asked Abbas how the $100 million in tax revenues that Israel transferred to the PA in recent months was spent. Israeli officials have said that a large portion of the funds was used to pay the salaries of members of the PA security forces, instead of being used to reform the security forces.

The two sides agreed that aides to Olmert and Abbas would hold another meeting this week, during which the Palestinians will explain how the funds were used.

Abbas also said he would like to renew the activities of the joint Israeli-Palestinian committees, although at Olmert is refusing for the time being.

The meeting was Abbas and Olmert's second round of talks in less than a month, and comes weeks after Abbas' Fatah movement and the ruling Hamas reached an agreement at a summit in Mecca to form a unity government.

Abbas had planned to ask Olmert to view the new PA unity government "as a positive step," his aide said.

Heading into the meeting, which got underway at Olmert's official residence in Jerusalem a little after 5 P.M., both sides acknowledged that prospects for a breakthrough in peace efforts were slim.

A senior Abbas aide also played down expectations of the talks, saying earlier Sunday that, "We don't expect any results."

Olmert and Abbas walked into the residence together. The two leaders, flanked by their aides, sat on opposite sides of a conference table as the talks began. Olmert smiled to TV cameras in the room as he exchanged pleasantries with Abbas.

Israel Radio reported that the first part of the talks would see Israeli and Palestinian teams, headed by Olmert and Abbas, confer, after which the two leaders would have a one-on-one parley.

Hamas spokesman Fawzi Barhoum said the group expected Abbas "not to yield to Israeli and U.S. pressure." The ruling Islamist movement has insisted that it will not recognize Israel.

According to Palestinian sources, the meeting is in line with a U.S. request for Olmert and Abbas to hold regular meetings.

The last talks, on February 19, were also hosted by Olmert.

But the prime minister has said that "according to the principle of reciprocity," he does not rule out holding future meetings in Palestinian territory.

Hours before the summit, Olmert said Sunday that Israel was willing to treat the 2002 Saudi peace initiative "seriously," and said he supports a regional summit to discuss the plan.