(Adds Olmert comments to Time magazine, paragraphs 8, 19)

By Adam Entous

JERUSALEM, March 30 (Reuters) - Israeli Prime Minister Ehud Olmert said he was ready to hold talks with Saudi Arabia and other Arab states about their renewed peace plan but rejected any return of Palestinian refugees as "out of the question".

In interviews with Israeli newspapers published on Friday, Olmert said the plan endorsed by Arab leaders at a summit in Riyadh could help create positive momentum in future negotiations.

"There is a significant chance that in the next five years Israel can get to a comprehensive peace," Olmert said.

But he made clear aspects of the Arab plan were "problematic" and that Israel was not prepared to embrace it, "jump in and say 'This is it'".

The Arab plan offers Israel normal ties with all Arab countries in return for withdrawal from land seized in the 1967 Middle East war, the creation of a Palestinian state and a "just solution" for Palestinians displaced in 1948 with Israel's creation.

Israel opposes giving Palestinian refugees the right of return to their former homes in what is now the Jewish state, and it wants to hold onto some of the major settlement blocs in the occupied West Bank.

"There are interesting ideas there (in the Arab plan), and we are ready to hold discussions and hear from the Saudis about their approach and to tell them about ours," Olmert told the Haaretz newspaper.

He told Time magazine of the Saudi effort: "There are all kinds of details that I would easily accept and some that I may not."

But the right of return, Olmert told the Jerusalem Post, is "something we certainly can't agree to and we won't agree to".

"I'll never accept a solution that is based on their return to Israel, any number," he said.

Israelis fears that any mass return of refugees would threaten the Jewish character of their state.

Islamist group Hamas, which heads the Palestinian government, has called on Arab leaders not to compromise on the right of refugees to return.

Arab leaders in Riyadh gave the green light to creating a committee that could negotiate details of the plan with the Jewish state and others.

Israel's elder statesman and deputy prime minister, Shimon Peres, told Reuters Television that Israel, the Palestinians and the Arabs should now work out their differences in direct talks, "otherwise, I'm afraid, we shall go in a vain debate that will lead nowhere."

To revive the peace process, the United Nations has raised the idea of holding an expanded meeting of the Quartet of Middle East mediators that would include Israeli and Saudi leaders.

Olmert said earlier this week that he would be willing to attend, but Saudi Arabia told Washington it was not prepared to take part at this time if Israel was included, Western diplomats said.

As a result, diplomats said Quartet partners the United States, the European Union, Russia and the United Nations were likely to hold separate meetings, one with Arab states and another later with Israeli and Palestinian leaders.

Olmert and other Israeli officials have held secret talks in recent months with Saudi officials, according to diplomats and Israeli media reports. Agreeing to a public meeting would be a major breakthrough.

"I can tell you that if I'd had an opportunity to meet with King Abdullah of the Saudis -- which I have not -- he would be very surprised to hear what I have to say. I look very favourably at the active role Saudis are now playing in the Middle East for many years," Olmert told Time.

Under U.S. pressure, Olmert has agreed to hold confidence-building talks every two weeks with Palestinian President Mahmoud Abbas that could lead to discussions about the outlines of a Palestinian state. (Additional reporting by Ari Rabinovitch)

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