By Nidal al-Mughrabi

KHAN YOUNIS, Gaza Strip, June 4 (Reuters) - Children splash in the waves and play games along the beach as parents grill meat and feast on watermelon -- the people of the Gaza Strip relishing a respite from battles and an Israeli blockade.

One boy builds a sandcastle in the form of the Dome of the Rock in Jerusalem, an object of longing for many Palestinians, who have had little chance to visit the historic mosque since Israel captured Jerusalem's Old City 40 years ago this week.

Just offshore, in clear, blue waters sparkling in the bright Mediterranean sun, an Israeli patrol boat cruises past. It is a reminder of the security cordon Israel has tightened around the crowded enclave since withdrawing its army from the territory it occupied in the Six Day War of June 1967.

"We have no escape but to come to the sea, although there is still fear," said Khaled Abu Mustafa, eating a slice of melon and pointing at the Israeli naval ship on the prowl for arms smugglers or militants heading up the coast to Israel.

Israel's withdrawal allowed the people of Khan Younis in the south of the Strip to return to the beaches for the first time in six years -- Israeli troops had barred the way following the start of an uprising, or intifada, against occupation in 2000.

Yet now the 1.5 million people of Gaza have other cares. Some 50 people were killed in fighting between rival factions in the territory last month and Israel has resumed air strikes and other measures against rockets being fired at Israeli towns.

"The situation remains very frightening. From one side the Jews are bombarding us and from the other the fighting between Hamas and Fatah is not fully over," said Abu Mustafa.

On top of that, the victory of the Hamas Islamist movement in last year's parliamentary election has brought Israeli and international sanctions, virtually sealing Gaza's borders and withholding aid and revenues to the Hamas-led government.

"I come here because if I did not I feel I would have died at home thinking of my debts because of the embargo imposed on us," said Loai Abdel Ghaffour, typical of thousands of workers in Gaza and the West Bank who have barely been paid in months.

WORRYING TIMES

"We were deprived of the sea for six years during the uprising. Now life is back to normal," father-of-eight Hani Barbakh reflected as he smoked a water pipe and recalled the departure of Israeli troops and Jewish settlers in 2005.

Nonetheless, there are still anxieties for Gazan parents. There remains a risk of street clashes between fighters from Hamas and Fatah, the two factions in the coalition government. And Israeli strikes, including from ships offshore, are a worry.

Last year, many Palestinians stayed away from beaches after an explosion killed several members of one family -- Palestinians blamed Israeli artillery, though Israel denied it.

But as his children played or, in one case, studied for exams, Barkhan said: "Despite the fear, we had to bring the children to breathe some clean sea air and to play a bit."

Like most Palestinians, he fervently hopes the rival factions can come to terms and bring security and prosperity to Gaza: "We are one people and I believe the internal fighting, even if starts again, will be soon resolved.

"I don't think it will develop ... into a civil war."

Some analysts are not so sanguine. Attention for now is focused on talks with Egyptian mediators by Hamas and Fatah leaders who are also pondering how to renew a truce with Israel.

Yet decades of hardship have inured Palestinians to risk. And with the arrival of warm summer weather and a lull in the violence this week, there is a determination to hit the beach:

"Death is all the same, whether you die in an Israeli air strike or in the internal fighting," said Ghaffour, a father of five. "For now we need to get away from thinking about it and just enjoy the beach."

And after a day of fresh air, as children wander home towards the sunset, the tide washes away traces of their games and the Dome of the Rock built in sand melts into the sea.

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