The only logical context for releasing Fatah terrorists from prison and taking others off the arrest list (Zbeidi, etc...) is that Olmert is laying the groundwork for some sort of push on a negotiated deal with Abu Mazen. The deal is clear and the split in the PA may even be helpful and would probably go something like this: Olmert and Abu Mazen agree to a "67 for 48" (i.e. we give up 67 to solidify 48) with some sort of special arrangement in J'lem and land swaps for the larger settlement blocks. Each then presents the deal to his respective constituencies for a take it or leave it referendum. Hamas and the Likud/Settlers can scream all they want but the bottom line is that if given the choice, Israelis and Pals will approve such a deal. They'll have to work qucik because Hamas will try to derail the deal with some big suicide attacks and our own fanatics may try to a strategic attack (on Al-Aqsa for instance) to derail matters.
Israeli PM to Palestinian President Abbas: We must fight terror together (Haaretz)
from the article: Fayad: No point in goodwill gestures without negotiations