By Ari Rabinovitch

JERUSALEM, Nov 19 (Reuters) - Israeli Prime Minister Ehud Olmert will ask his cabinet on Monday to release up to 450 Palestinian prisoners ahead of talks with Palestinian President Mahmoud Abbas on a U.S.-sponsored conference on statehood.

The meeting between the two leaders in Jerusalem on Monday will be their last before the Annapolis, Maryland conference, expected to convene on Nov. 26-27.

Israeli government spokesman David Baker said Olmert and Abbas will discuss "preparations for Annapolis and how both sides will proceed together after Annapolis". Disputes between the two sides have emerged over a joint document meant to address in general terms issues such as borders, and the future of Jerusalem and Palestinian refugees.

U.S. and Israeli officials said the document is not a precondition for holding the conference, called by President George W. Bush to bolster Abbas and launch long-stalled peace talks after Hamas Islamists took over the Gaza Strip in June.

Middle East envoy Tony Blair plans to announce projects designed to strengthen the Palestinian economy, including one in Hamas-controlled Gaza.

Abbas dispatched top aides to Washington on Sunday to try to narrow differences on the document ahead of a meeting of Arab League foreign ministers on Thursday.

Palestinian officials suggested reaching an agreement on the document was crucial to ensuring the participation of key Arab states such as Saudi Arabia.

Olmert will ask his cabinet to approve the release of up to 450 Palestinian prisoners, Israeli officials said. The number falls short of the 2,000 requested by Abbas.

The Bush administration has been pushing Israel to increase the number of prisoners to be released, as well as to go beyond a partial West Bank settlement freeze.

Israeli officials said they will not be able to release many more prisoners without changing existing criteria, which exclude Hamas members and those who have "blood on their hands", a reference to deadly attacks against Israelis.

Olmert had sought to exempt the occupied West Bank's major settlement blocs, which Israel intends to keep under any final peace deal, from any construction freeze. But Washington rebuffed the idea, Israeli and Western officials said.

A 2003 peace "road map" calls on Israel to freeze all settlement activity and for the Palestinians to rein in militants. (Editing by Elizabeth Piper)

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