Bush’s letter, which was instrumental in enabling Sharon to get 2005’s disengagement from the Gaza Strip through the cabinet, stated: “It is unrealistic to expect that the outcome of final status negotiations will be a full and complete return to the armistice lines of 1949, and all previous efforts to negotiate a two-state solution have reached the same conclusion.

It is realistic to expect that any final status agreement will only be achieved on the basis of mutually agreed changes that reflect these realities.”

Israel has widely interpreted this to mean that the US backed its position that the major settlement blocks would remain inside Israel in any future agreement. The Obama administration had never endorsed this letter, with Secretary of State Hillary Clinton saying last year that there were no “informal or oral enforceable agreements” regarding the settlements with the Bush administration.

A formal endorsement of that letter by the Obama administration would be considered significant in Jerusalem, and a Netanyahu willingness to extend the moratorium freeze in the majority of the West Bank would likely be seen as somewhat of a concession in Washington.

This formula, according to officials, would be one way to finesse what is looming as a major issue of contention with the US: whether the 10-month-old settlement moratorium set to expire at the end of September will be extended.

Committee rejects bill requiring Knesset moratorium approval

Netanyahu, meanwhile, won an important battle in the Ministerial Committee for Legislative on Sunday, when it rejected a bill that would have forced him to get Knesset approval before any further moratorium on construction in the settlements.

The settlement-moratorium issue, as well as other issues such as the situation in Gaza; Turkey; Iran; and the Obama’s administration’s backing of an Nuclear Non-Proliferation Treaty document at the UN that singled out Israel are expected to be the focus of talks Netanyahu is scheduled to hold with Obama on Tuesday in Washington.

Netanyahu is scheduled to leave for Washington late on Monday.

Despite the weighty issues on the agenda, this meeting – a make up of a meeting postponed from last month that was designed to improve the tone of the US-Israel ties – is expected to be very cordial, with the atmosphere much improved over the previous four meetings the two leaders have held in their current positions.

A change in tone was apparent last week, when Dan Shapiro, the National Security Council’s senior director for the Middle East and North Africa, held a video conference in advance of Netanyahu’s trip and said, “This is a very close relationship, a special relationship, a strategic alliance with one of our closest partners in not just the Middle East but the entire world.”

This is already a far cry from March, when – shortly after the dust-up following the announcement of new construction in northeast Jerusalem’s Ramat Shlomo neighborhood during Vice President Joe Biden’s visit here – State Department spokesman P.J. Crowley hinted that the US-Israel relationship would be dependent on the peace process with the Palestinians, and when administration officials hinted that Israel’s policies were endangering the lives of US soldiers.

Netanyahu was supposed to meet with Obama in early June, following a visit to Ottawa to meet with Canadian Prime Minister Stephen Harper, but that meeting was postponed because Netanyahu had to rush back to deal with the fallout from the IDF raid on the Turkish ship trying to break the Gaza blockade.

The June meeting, called in the midst of the Obama administration’s “charm offensive” meant to repair damage caused by the widely perceived surly manner in which Obama received Netanyahu at the White House during their last meeting in March, was expected to be an opportunity to show publicly that Netanyahu and Obama had “pushed the reset button” in their relationship.

The invitation for the June meeting came after Obama was publicly taken to task by key Democratic politicians, including New York Sen. Chuck Schumer, for the tone of his relationship with Israel, and after Obama met Jewish politicians, and his top aides met on two occasions with a group of key US rabbis.

Tuesday's meeting to be accompanied by press conference

Since the June meeting was postponed, Tuesday’s meeting is widely expected to have at least the public trappings of a change of tone. Unlike Netanyahu’s previous two meeting in the White House – in November and again in March when there was no press availability – Tuesday’s meeting will be accompanied by a photo-opportunity and brief press conference.

Both Shapiro and Netanyahu said the talks would focus on how to move from indirect to direct talks with the Palestinians.

“A major focus of the discussion will be around the progress that’s been made so far in the proximity talks and the opportunity to make the transition into direct talks,” Shapiro said.

“And we’ve always viewed the proximity talks as a mechanism to get to direct talks, which is where the real negotiations toward agreements and ultimately an agreement that will produce a two-state solution can be achieved.”

Netanyahu, at Sunday’s weekly cabinet meeting, said, “The main goal of the talks with President Obama will be to advance direct talks in the peace process between us and the Palestinians.”

Netanyahu said there was no substitute for direct negotiations.

“One cannot raise ideas in either the media or by other means, and avoid that direct contact, that is the only possible way to bring about a solution to the conflict between us and the Palestinians,” Netanyahu said, in reference to recent interviews granted by Palestinian Authority President Mahmoud Abbas.

“We are 10 minutes apart.

Ramallah almost touches Jerusalem. I have been ready to meet with Abu Mazen [Abbas] since this government’s first day in office,” Netanyahu said.

“Whoever desires peace will hold direct peace talks. I hope that this will be one of the results of my trip to Washington.”

Diplomatic sources said that although it was clear the US would like to see a freeze on settlement construction throughout the West Bank and Jerusalem, Obama – whose eyes are already on November 2’s midterm election – is unlikely because of domestic political considerations to do anything that would make him appear as if he was placing public pressure on Israel, at at time when he was not seen as placing equivalent public pressure on the Palestinians or the Arab world.

One diplomatic official said that “crunch time” for the Netanyahu government in terms of its relationship with Obama was not likely to come until after the November election, and before the beginning of the 2012 presidential race that will start heating up already in the fall of 2011.

PA negotiator Saeb Erekat, meanwhile, put the onus on Netanyahu to pave the way for direct negotiations.

“If he wants direct talks, he knows he has the key – by stopping settlement activities and resuming negotiations where they left off in December 2008,” Erekat said. “If he does this, we will go immediately to direct negotiations.”

Erekat said the Palestinians have not heard any specific proposals from Netanyahu concerning security arrangements and the borders of a future Palestinian state. “Mitchell brought us nothing,” Erekat said.

AP contributed to this report.