(Adds Hamas arrest Fatah demonstrators in Gaza, last paragraph)

By Nidal al-Mughrabi

GAZA, July 12 (Reuters) - Israel lost its first soldier in combat in nine months on Thursday in a confrontation with Hamas militants in the Gaza Strip, where the Islamist group seized control over rival Palestinian factions a month ago.

In the occupied West Bank, Israeli troops shot dead a Palestinian gunman after he sprayed bullets at an Israeli checkpoint, the army said.

In the Gaza clash, which fell on the anniversary of the start of Israel's war with Lebanese Hezbollah guerrillas a year ago, two other soldiers and two Palestinian gunmen of the Islamic Jihad group were also wounded.

An Israeli military statement said the soldier, the first Israeli to die in combat since November, was killed in a raid on militant targets in central Gaza.

Hamas's armed wing, the Izz el-Deen al-Qassam Brigades, said its gunmen ambushed the Israeli troops raiding the al-Bureij refugee camp in Gaza, by detonating explosives and firing rocket-propelled grenades and machineguns.

The fighting, involving troops backed by tanks and bulldozers, ended in the evening as the soldiers went from house to house, detaining dozens of Palestinians, the army and local witnesses said.

Prime Minister Ehud Olmert vowed Israel would continue to fight the militants in Gaza, where Israel has stepped up incursions to isolate Hamas's rulers who refuse to recognise Israel and bar gunmen from firing rockets at the Jewish state.

"The terrorists in Gaza are the enemies of the future hopes between us and the Palestinians," Olmert said.

The Qassam Brigades group vowed to continue "to sow death among the soldiers of the occupation in our beloved Gaza Strip".

Israel withdrew its forces and Jewish settlers from Gaza in 2005 but has pressed on with raids, particularly since Hamas's rout on June 14 of forces loyal to President Mahmoud Abbas.

OLMERT TO MEET ABBAS

Nabil Amr, an Abbas aide, said the Palestinian government in the West Bank "totally rejected and condemned" the raid.

Despite the violence, Olmert planned to meet Abbas on Monday for a second round of talks since the Palestinian leader established his new, emergency administration last month, an Israeli official told Reuters.

Olmert himself confirmed during a visit to northern Israel close to the Lebanese border that he would meet Abbas "early next week" to discuss political issues and Israel's pledge to release 250 Fatah members from its jails.

Amr said no date had yet been set for these talks though "efforts are being made to arrange a date for this meeting".

In Washington, a U.S. official said U.S. Secretary of State Condoleezza Rice has postponed a trip to the Middle East next week. The official, who asked not to be identified because the decision had not been announced, said the stops in Jerusalem and Ramallah were expected to be added to a Mideast trip Rice now plans in early August.

The Gaza violence coincided with the anniversary of a war Israel launched last July 12 following Hezbollah's capture in a border raid of two soldiers -- a war whose aftermath saw Olmert's popularity plummet for the failure to crush Hezbollah.

The United States has sought to boost the emergency cabinet Abbas appointed in the West Bank to replace a unity government with Hamas he sacked after last month's fighting in Gaza. That move has divided control over the Palestinian territories.

With Western backing, Israel has sought to isolate Hamas in coastal Gaza, keeping most of the territory's crossings to the Jewish state largely shut, opening them only partially to allow in humanitarian supplies to reach 1.5 million residents.

In Gaza City hundreds of government employees appointed by Hamas took to the streets demanding to be paid by the emergency government which has paid only employees not aligned with Hamas.

In southern Gaza, Fatah supporters marched in the streets and voiced support for the secular movement for the first time since Hamas took over the territory. They taunted Hamas Executive Force guards who fired in the air and dispersed them.

Hamas forces later arrested some of the demonstration's organisers including three brothers, one of whom is a leading Fatah official in southern Gaza. A fourth man was shot and wounded during the arrest raid and was taken to hospital. (Additional reporting by Adam Entous, Ori Lewis and Avida Landau in Jerusalem, and Mohammed Assadi in Ramallah)

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