(Adds aides to Olmert, Abbas meeting)

By Dean Yates

JERUSALEM, Nov 22 (Reuters) - Israel's security cabinet on Wednesday decided to press on with military raids and "targeted killings" in the Gaza Strip but had not ordered a large-scale assault in response to a wave of Palestinian rocket attacks.

As Israeli forces killed four Gazans in fresh fighting -- two militants and two civilians, according to Palestinian witnesses and medics -- a cabinet statement said the military had been told to prepare and present a plan for a broader sweep.

More Israeli tanks and armoured vehicles rolled into northern Gaza, joining forces already there, witnesses said.

Soldiers killed two gunmen from the governing Hamas faction, hospital officials said. They said a Palestinian woman, 35, was killed by Israeli shelling in an area used by rocket crews, and that troops killed a 14-year-old boy in a nearby refugee camp.

A military spokeswoman said Israeli forces had fired at Palestinians who attacked them with rifles and rockets.

Some ministers had wanted Israeli Prime Minister Ehud Olmert to approve tougher action to halt rocket salvos from Gaza.

A large-scale offensive, however, holds political risks for Olmert, whose popularity plummeted in opinion polls after Israel failed to crush Lebanese Hezbollah guerrillas in a recent war.

The statement said the security cabinet decided to continue operations against rocket-launching squads and targeted killings of those involved in "terror activities". It also called for more cooperation with Egypt to prevent weapons from reaching Gaza.

Olmert, aware of the international scrutiny of Israel's operations in Gaza, last week appeared to rule out a massive assault, saying rockets could not be halted in "one fell swoop".

The increasingly sophisticated weapons, generally made in metal workshops, killed two Israelis in the past week.

Militants -- some from factions sworn to the Jewish state's destruction -- call the missiles a response to Israeli assaults, including a Nov. 8 barrage that killed 19 civilians in the town of Beit Hanoun. Israel said it made a targeting error.

DIFFERENT OPINIONS

Public Security Minister Avi Dichter called for a large offensive in Gaza at the meeting, political sources said.

But military chief Lieutenant-General Dan Halutz shot this down, asking what would happen after a major push.

"There has to be a (diplomatic) horizon," Halutz said without elaborating, according to one source.

Palestinian President Mahmoud Abbas, a moderate, has been struggling to revive peacemaking despite opposition from the Hamas Islamists with which he shares power.

Aides to Abbas and Olmert met on Wednesday. Palestinian negotiators Saeb Erekat characterised those talks as "important" but said they ended inconclusively after Israel conditioned a summit on the release of a soldier captured by Gaza militants.

The Palestinians want prisoners held in Israeli jails freed and for Israel to end its military operations. Israeli officials had no immediate comment on lower-level meeting.

Separate political sources said some Israeli officials, during internal discussions, had mooted the idea of an internationally brokered deal to end the fighting and possibly allow deployment of foreign peacekeepers in Gaza.

Israel is watching whether international troops in southern Lebanon can keep the peace in the wake of last summer's war.

In the fresh fighting in Gaza, the army said one soldier was wounded when he was hit by an anti-tank rocket near Beit Hanoun.

Militants have fired 100 homemade rockets at Israel since the shelling of Beit Hanoun two weeks ago.

Israel quit Gaza last year, but it renewed ground operations after militants seized a soldier in a border raid in June.

Since then, Israel has killed more than 370 Palestinians in Gaza, about half of them civilians, hospital officials and residents say. Three Israeli soldiers have been killed.

There was also violence on Wednesday in the occupied West Bank, another territory where Palestinians seek statehood. Israeli troops shot dead a Palestinian gunman during an exchange of fire in the city of Jenin, witnesses and the army said. (Additional reporting by Nidal al-Mughrabi in Gaza, Jonathan Saul in Jerusalem, Wafa Amr in Ramallah and Wael al-Ahmad in Jenin)

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