A rocket salvo from Lebanon slightly wounded two people in northern Israel and briefly raised fears that Hezbollah fighters were opening a second front to relieve pressure on Gaza. But an Israeli cabinet minister blamed Palestinian groups in Lebanon.
US backing for an Egyptian truce proposal has increased pressure on Israel to end its Gaza war as casualties mount.
The Hamas-run health ministry in Gaza put the Palestinian death toll at 707 since the Israeli assault began on 27 December. It said at least 3,000 people had been wounded.
German Chancellor Angela Merkel said she agreed with French President Nicolas Sarkozy on conditions for a ceasefire, but neither Israel nor Hamas has agreed on the details.
Israeli Prime Minister Ehud Olmert said the government's goal that "quiet will reign supreme" in southern Israel had not been achieved. A decision on further military action "is still ahead of us", his office quoted him as saying in the south.
Eleven Israelis have died in the past 13 days, eight of them soldiers, including four killed by "friendly" fire.
The International Committee of the Red Cross (ICRC) said its officials and Palestinian ambulance workers had found four starving children huddled with at least 12 corpses in Gaza in a house 80 metres from an Israeli military position.
Among the dead in the house, found lying on mattresses, were the children's mothers, the ICRC said.
In nearby houses in Gaza's devastated Zeitoun neighbourhood, the team found another three corpses and 15 survivors, including several who were wounded, the Geneva-based agency said.
It accused Israel of delaying ambulance access to the area and said the Israeli army must have been aware of the situation but did not help the wounded, in violation of international law.
"This is a shocking incident," said Pierre Wettach, ICRC chief for Israel and the occupied Palestinian territories.
The Israeli military said it would investigate any formal complaint against its conduct, but said it had "demonstrated its willingness to abort operations to save civilian lives and to risk injury on order to assist innocent civilians".
In northern Israel, police said one of three rockets fired from Lebanon tore a hole in the roof of an old people's home in the town of Nahariya, where two people were hurt. The attack initially aroused fears that Hezbollah was behind it.
But a senior Israeli cabinet minister pointed the finger at Palestinian groups in Lebanon. "These are isolated incidents," Rafi Eitan said on Israel's Channel 2. "We expected this."
The army, which fought a 34-day war with Shi'ite Hezbollah guerrillas in 2006, responded only with a few artillery rounds. There were no reports of casualties in Lebanon.
The commander of UN peacekeepers in Lebanon urged "maximum restraint" and the Beirut government criticised the perpetrators for violating the UN resolution that halted the 2006 war.
In the Hamas-ruled Gaza Strip, Israeli air strikes and ground attacks killed seven civilians and three gunmen, medical officials said. One Israeli soldier was killed, the army said.
The dead included two brothers aged six and 13, who were killed when an Israeli air strike missed a group of Islamic Jihad fighters in Abassan in the southern Gaza Strip. Four other passersby were wounded, medical workers and residents said.
In the occupied West Bank, Israeli police shot and killed a Palestinian who tried to set fire to a petrol station at a Jewish settlement, police said.
Gaza residents described an overnight bombardment east of the city as among the heaviest so far. In the south of the strip, tanks advanced towards Khan Younis town, witnesses said.
Palestinian medics said Israeli soldiers shot a truck driver dead and wounded another as they headed through the Gaza Strip to pick up UN supplies at the Erez crossing. There was no immediate UN comment. The Israeli army said it was checking.
Israel has accused Hamas of deliberately trying to disrupt aid as part of propaganda efforts, charges the movement denies.
Although Israel pressed on with the offensive, it has said it accepts the "principles" of a European-Egyptian ceasefire proposal. Washington has urged Israel to study the plan.
Israel again suspended its assault briefly today to help Gaza's inhabitants stock up on much-needed supplies. The army conducted a similar three-hour lull yesterday.
With both George W. Bush's outgoing US administration and President-elect Barack Obama speaking out on the need for peace, officials said Israel sent an envoy to Cairo to discuss how the Egyptian plan might be implemented.
That could take several days. For now, Israeli military commanders appear determined to keep up the pressure on the ground, even if the cabinet has put off a decision on a possible new phase to attack militants in Gaza's towns and cities.
Israeli leaders face a parliamentary election in a month and will want to show the public that they have met their aims by dealing a blow to Hamas and preventing it from rearming.
Over a dozen rockets hit southern Israel today.
Hamas officials said the group was still considering the Egyptian plan, brokered with France.
European governments have offered to back Cairo's proposal with an EU border force to stop Hamas, which took over Gaza in 2007, from rearming via tunnels under Gaza's border with Egypt.
The plan would also address Palestinian calls for an end to Israel's economic blockade of the Gaza Strip. Hamas called off a six-month ceasefire late last month, accusing Israel of breaking an agreement to open border crossings to more supplies.
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