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Israeli helicopter missiles crashed again and Palestinian militants vowed vengeance anew, deflating reports of an imminent ceasefire needed to prevent a new US-backed peace initiative from unravelling.

With more than 60 dead bloodying the "road map" plan since US President George W. Bush launched it at a peace summit on June 4, and both sides disinclined to break out of a cycle of violence, Washington prepared to crank up its crisis diplomacy.

Bush's powerful national security adviser, Condoleezza Rice, is to visit the region this weekend to deal with the reluctance of two profoundly mistrustful sides to stop shooting first.

The tactical stand-off reflects a broader strategic divide -- Islamic militants want not only Palestinian statehood but Israel destroyed, while Israel's ruling right opposes handing back land taken in a 1967 war and laced with Jewish settlements.

The road map charts confidence-building gestures leading to a Palestinian state in the West Bank and Gaza Strip alongside Israel by 2005, but it has been plagued by violence from the start, scrambling the latest bid to end the long Middle East conflict.

Israel has defended its continued "track-and-kill" operations against militants and its military grip on Palestinian towns by saying that to change either policy before Palestinians cease attacks would be disastrous.

The Palestinians' new reformist leadership argues it will struggle to cement a ceasefire and clip the wings of militants thriving off the misery wrought by Israeli military clampdowns unless Israel eases off.

"We have made clear Israel's right to self-defence but the Israelis need to consider the consequences of their actions. The Palestinians need to do everything possible to dismantle the terrorist network," a US State Department official said.

BYSTANDERS DIE IN STRIKE ON MILITANTS

On Wednesday, an Israeli helicopter gunship fired missiles into two cars in southern Gaza, seriously wounding its quarry -- a wanted Hamas militant -- but killing two bystanders.

An Israeli army spokesman said a helicopter fired two missiles to take out a "Hamas terrorist cell on its way to firing mortar shells into Israeli communities", most likely Jewish settlements in the tiny Mediterranean strip.

The missile strike came shortly after Israeli troops killed two raiding Hamas militants in a gunbattle in northern Gaza.

Afterward, political leaders of Hamas and its smaller cohort Islamic Jihad denied a flurry of media reports that they had tentatively decided to suspend attacks. They accused Israel of thwarting calm with continued "assassinations".

"We have no idea about these reports. We are still in a process of consultation within the movement. Every time we near a decision (Israel) slaughters more of our people," senior Hamas figure Abdel Aziz al-Rantissi said.

"A decision will be made in coming days. We will take all developments and the continued Israeli aggression into account," said Rantissi, who escaped with light wounds when Israel tried to assassinate him with helicopter missiles on June 10.

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