JERUSALEM, Oct 12 (Reuters) - With about a month to go before a U.S.-sponsored conference on Palestinian statehood, how far apart are Israeli and Palestinian negotiators?

Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas have set out in private the following positions on the three biggest final-status issues, Israeli, Palestinian and Western officials familiar with the talks have told Reuters:

BORDERS:

Olmert has privately expressed a willingness to relinquish "90-something" percent of the West Bank territory, along with 100 percent of the Gaza Strip, as part of a final peace deal, Western officials said.

They said Olmert was likely to offer at least 92 percent of the West Bank, with a land swap to compensate the Palestinians for Jewish settlement blocs that would be part of Israel.

The officials said Olmert would be prepared to offer Israeli land equivalent to between 4 and 6 percent of the West Bank in exchange for the settlements.

Israeli officials and Western diplomats said Olmert wants to be compensated territorially for the 35-km (20-mile) corridor of land that would be used to connect the West Bank to the Gaza Strip. It is unclear how much land this would entail or whether this would be part of the exchange for the settlement blocs.

Abbas has demanded the equivalent of 100 percent of the West Bank and Gaza Strip, a land area totalling 6,205 sq.km. (2,396 sq. miles). That is the amount of Palestinian territory that Abbas estimated Israel captured in the 1967 Middle East war.

But Abbas has also raised the possibility of amending the pre-1967 lines. Palestinian officials say Abbas may be willing to accept a 1.5-to-2 percent land swap, provided the end result is a state on 6,205 sq.km. of territory.

JERUSALEM

Abbas is demanding that Arab East Jerusalem be the capital of any future Palestinian state. West Jerusalem would be the capital of Israel. Israel at present regards all of Jerusalem as its capital but this is not recognised internationally.

In negotiations in 1994 and 1995, Abbas backed the idea of expanding the boundaries of Jerusalem to include Abu Dis, a West Bank area that abuts East Jerusalem, as a way of providing for both Israeli and Palestinian capitals, according to negotiators who were involved at the time.

One of the biggest sticking points is how the Old City, site of Judaism's Western Wall and Islam's al-Aqsa mosque and Dome of the Rock, would be administered.

One of Olmert's closest confidants, Vice Premier Haim Ramon, said Israel should in future negotiate creation of a "special regime" that would govern the Old City's holy sites.

In a proposal to end the conflict in December 2000, U.S. President Bill Clinton called for Palestinian sovereignty over the area where al-Aqsa and the Dome of the Rock stand. Israel would have sovereignty over the Western Wall.

There would be an international monitoring system.

REFUGEES

Ramon said Olmert's government would not allow a formal "right of return" for millions of Palestinian refugees to what is now Israel. But Ramon said some Palestinians could ask to settle in Israel "on the basis of charity and mercy".

Israel wants Abbas to give up the "right of return" in exchange for Israeli concessions on Jerusalem and borders.

Abbas has pointed to language on the right of return in U.N. resolutions and an Arab League peace plan as possible models.

First launched in 2002, the Arab initiative calls on Israel to reach an "agreed and just" solution for Palestinian refugees based on U.N. Resolution 194, which calls for the return of refugees and compensation for those who do not go home.

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