By Nidal al-Mughrabi BEIT HANOUN, Gaza, Nov 3 (Reuters) - Israeli troops surrounded a mosque in Gaza early on Friday where 60 Palestinian gunmen were holed up, witnesses said, pushing ahead with one of their biggest offensives in the strip in months. Sixteen Palestinians have been killed, more than half of them militants, since Israeli troops entered the north Gazan town of Beit Hanoun on Wednesday. One Israeli soldier has been killed in the operation. Residents said the town of 30,000 people was effectively under an army curfew and in its control. Hospital officials said a four-year old Palestinian boy from Beit Hanoun was declared dead on Friday after being wounded on Thursday by a tank shell. Another child remained critically wounded. "The operation is targeting terrorist infrastructure in the area of Beit Hanoun and in particular is against rocket-launching infrastructure," an Israeli military spokesman said. Witnesses said Israeli bulldozers had demolished a wall of a mosque in Beit Hanoun where 60 gunmen had fled. They said troops fired stun grenades and tear gas in the area of the mosque in a bid to force the gunmen to surrender. Separately, Palestinian witnesses and medical officials said an air strike east of the neighbouring northern town of Jabalya had critically wounded two militants. A military spokesman said an aerial attack had targeted armed gunmen planting explosives they intended to detonate against Israeli troops. Witnesses said Israeli tanks and bulldozers were spotted on the outskirts of Jabalya. The Israeli military said it was not aware of such a deployment in that area. PEACE HOPES SEEN DIM The operation is aimed partly at halting rocket fire at the Jewish state from the area. Militants still managed to launch six homemade missiles at the Israeli border town of Sderot on Thursday, wounding at least two people, medical officials said. The offensive has further weakened any chance of resuming peace talks, already minimal since Hamas took office in March after winning elections. Hamas is sworn to Israel's destruction. On Wednesday Israeli Prime Minister Ehud Olmert's security cabinet agreed to continue Gaza operations and step up pressure on Hamas, a government statement said. It did not elaborate. In a separate development, Palestinian officials said Hamas and Fatah had agreed in principle to form a new government. Details were expected to be finalised soon. Some sources said the deal could see the formation of a government of "technocrats" without direct affiliation to either faction. Hamas has said the bloodshed could also complicate Egyptian-brokered talks aimed at arranging a swap of Palestinian prisoners in Israel for an Israeli soldier abducted by militants in a cross-border raid last June. The assault is one of the biggest in the Palestinian territories since Israel launched an offensive in Gaza to try to force the release of the soldier and halt rocket fire. More than 280 Palestinians have been killed in the four-month-old offensive, about half of them civilians. Three Israeli soldiers have been killed. Israel withdrew its army and Jewish settlers from Gaza last year after a 38-year occupation, but tension increased along the frontier when Hamas took office and rebuffed Western demands that it recognise Israel and renounce violence. That prompted the West to impose sanctions on the Palestinian government.
