By Dan Williams

JERUSALEM, May 11 (Reuters) - Israel will host an Egyptian mediator on Monday to hear a proposal for a truce with Hamas in the Gaza Strip, though the Jewish state would still shun direct negotiations with the Islamist faction, Israeli officials said.

Following talks with Egyptian intelligence chief Omar Suleiman in Cairo last month, Hamas offered a six-month halt to hostilities in Gaza if Israel were also to lift a crippling embargo on the coastal Palestinian territory.

A spokesman for Israeli Prime Minister Ehud Olmert rebuffed the initiative when it was broached, but Israeli Deputy Defence Minister Matan Vilnai signalled possible flexibility on Sunday.

"Omar Suleiman will come, we will listen to him, we will confer, we will see what he is offering, and on that basis we will make decisions," he told Israel Radio.

"As of now, there is nothing on the table for discussion... We have no dialogue with an organisation that flies the flag of our destruction," Vilnai said in reference to Hamas's refusal to forswear violence and recognise Israel.

Another Israeli official said Suleiman would come on Monday.

The United States has endorsed Cairo's mediation in hope of curbing violence that threatens to derail peace talks between Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas, Hamas's Western-backed and secular rival.

A senior Israeli official said this month that Israel would likely agree to an informal ceasefire in Gaza if cross-border rocket attacks and arms smuggling into the territory ended.

On Friday, a mortar bomb fired by Hamas fighters in Gaza across the border killed an Israeli civilian. Hours later, Israel's air force killed five Hamas security men in Gaza.

Egypt would want to parlay any Gaza truce into a similar future deal in the Israeli-occupied West Bank. Cairo's plan also includes attempts to reconcile Hamas, which rules Gaza, and Abbas's Fatah movement, which runs the Palestinian Authority from its West Bank base.

Hamas seized Gaza from Fatah last June, prompting Israel to step up economic sanctions and Egypt to shut its border with the coastal enclave. That border was temporarily opened on Saturday to allow sick and wounded Palestinians to seek treatment abroad.

Separately, Gaza's only power plant was forced to shut down due to a lack of fuel deliveries from Israel. Israeli officials said the EU-funded shipments would resume on Sunday.

Olmert, whose domestic standing has been sapped by an Israeli police investigation into his finances, pledged in a speech on Saturday to press ahead with peace talks with Abbas while responding harshly to attacks from Gaza.

"We will not desist from our actions and the other side knows how painful and harsh can be the blow that it will suffer," he said. "We will not relent until there will be full security for the citizens of Israel's south." (Editing by Sami Aboudi)

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