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Amos Gilad, the head of the Defense Ministry's Diplomatic-Security Bureau, returned from Egypt Thursday evening, and was updating Prime Minister Ehud Olmert, Defense Minister Ehud Barak, and Foreign Minister Tzipi Livni on talks held in Cairo.
Gilad, along with Olmert's foreign policy adviser Shalom Turgeman, headed an Israeli delegation in talks on a mechanism to prevent arms smuggling into the Gaza Strip which, according to the Prime Minister's Office, could create the conditions for a cease-fire.
The delegation also reviewed an Egyptian cease-fire proposal.
Officials said Israel was interested in obtaining a number of "guarantees" from the Egyptians, according to which Cairo would begin to crack down on the tunnel industry along the Philadelphi Corridor in Rafah.
While 100 tunnels have been destroyed since the operation began, the defense establishment estimates that there are still another 200 intact.
At the moment, there are several American military engineers who serve as advisers to the Egyptians, and Gilad discussed with the Egyptians the possibility of upgrading the force into a more permanent American presence on the ground along the Gaza-Egypt border.
"We are hoping to get guarantees from the Egyptians that they will stop the tunnels," a senior defense official said. "This is not simple, since the Egyptians do not want to appear as if they cannot deal with the tunnel threat on their own."
If the cease-fire does not materialize, the officials said, Israel would escalate its operations.
"We are prepared for every possibility," the senior defense official said. "If the cease-fire does not work out, we are ready to escalate and expand our operations."
The details of the different French and Egyptian proposals remained ambiguous. French President Nicolas Sarkozy, during his meeting with Olmert on Monday, presented a plan that included the following stages:
â€¢ The operation will continue.
â€¢ A mechanism to prevent the smuggling will be set up.
â€¢ Israel will declare a unilateral cease-fire.
â€¢ If Hamas fires on Israel, Israel can act against it.
â€¢ After a period of quiet, talks will commence on opening the crossings.
The Egyptian proposal was based on the following ideas: a mutual cease-fire, a willingness to talk about border arrangements, the opening of the crossings, and an urgent meeting between Israeli and Palestinian representatives to prevent any repetition of military action and to deal with the causes.
Israel issued a statement saying it looked favorably upon US, French and Egyptian efforts to reach a cease-fire based on the establishment of an international mechanism set up to stop the smuggling of arms from Egypt into the Gaza Strip, and viewed "positively" the dialogue with Egypt on this issue.
But Osama Hamdan, a Hamas representative in Lebanon close to the group's leadership in Syria, told Al-Jazeera television that Hamas would not accept any initiative that did not include the withdrawal of the Israeli army from Gaza and the opening of all of the territory's border crossings.
"Any proposal that does not include these bases is unacceptable, and no one should bother by presenting such proposals," he said.
"The idea of an international force is rejected, and such forces which will come to Gaza to protect Israel will be dealt with as enemy forces," he added.
The UN Security Council held a meeting on the issue Wednesday, amid reports that Hamas would prefer a cease-fire sponsored by the UN rather than one brokered by the French, Egyptians or Americans.
Turkish officials said on Wednesday that Ankara would be willing to be a part of any monitoring force along the Egypt-Gaza border, but would not lead the force. The officials also said there were a number of different proposals floating around, and it was too early to know which one would be adopted and what the role of international monitors would be.
And even as Turkey was offering its monitoring services, an Iranian envoy - Saeed Jalili - met in Ankara with Turkish Prime Minister Recep Tayyip Erdogan to discuss the situation in Gaza. Turkish sources said Jalili, who held talks earlier in the week in Damascus and Beirut, brought a message to Erdogan from Iranian President Mahmoud Ahmadinejad on the Gaza situation.
The contents of that message were not disclosed.
Defense officials, meanwhile, said the IDF would complete the second stage of Operation Cast Lead - taking control of northern Gaza - by the end of the week, and at the same time complete preparations for the third stage, which calls for deepening and expanding operations.
The security cabinet, while signaling in a statement that it looked positively on the cease-fire negotiations with the Egyptians, gave the IDF the green light to continue its operations. It stopped short, however, of approving the third stage, saying it would be reevaluated in the coming days.
Four out of the 12 security cabinet members are believed to favor widening the ground operation to topple Hamas: Vice Premier Haim Ramon, Industry, Trade and Labor Minister Eli Yishai, Justice Minister Daniel Friedmann and Pensioners Affairs Minister Rafi Eitan.
Defense Minister Ehud Barak, who was in favor last week of a French proposal for a 48-hour humanitarian lull in the fighting, is reportedly in favor of a cease-fire based on the Egyptian and French proposals.
Barak, in a meeting Wednesday with EU foreign policy chief Javier Solana, said Israel would not give up on its goal of creating a better security situation for the residents of the South. He said Israel would utilize all necessary diplomatic and military steps to reach that goal.
"We will consider an arrangement if it will create the necessary reality. If it doesn't, the IDF will continue to act and even intensify its operations inside the Gaza Strip," he said.
Barak added that while Hamas had suffered a very substantial blow, and Israel's deterrence has been strengthened, "our objectives have not been fully realized."
Yaakov Lappin and AP contributed to this report.