A prisoner exchange between Israel and Hizbullah to secure the release of kidnapped IDF reservists Eldad Regev and Ehud Goldwasser is still far from being settled, defense officials said Tuesday, downplaying reports a day earlier that a deal was on the verge of being reached. The officials said that while progress had been made in the German-mediated negotiations, Israel was waiting for Hizbullah's response to what has been described as Jerusalem's last offer for a prisoner swap with the Lebanese guerrilla group. Diplomatic officials also cautioned against undue optimism, saying that "these things are never done, until they are done." Israel, the officials said, remained extremely cautious, and advised weighing all the reports coming out of Lebanon very carefully. According to the reported proposal that Ofer Dekel (the official charged by Prime Minister Ehud Olmert with the issue of kidnapped soldiers) presented to German mediator Gerhard Konrad, Israel will be willing to release Samir Kuntar, four Hizbullah fighters captured during the Second Lebanon War and the bodies of 10 Hizbullah guerrillas in exchange for Goldwasser and Regev. Kuntar has been in prison since 1979, when he led a terrorist attack in Nahariya that resulted in the deaths of policeman Eliyahu Shahar, and Danny Haran and his two young daughters. On Monday night, in a speech broadcast to thousands of supporters in Beirut, Hizbullah leader Hassan Nasrallah said he expected Israel to release a number of Lebanese prisoners, including Kuntar, "very soon." Next week Israel will deport Nissim Nasser - a Lebanese Jew convicted of spying for Hizbullah in 2002 - back to Lebanon after he completes serving his six-year prison term. Nisr's lawyer said the deportation could be an opening move toward a wider prisoner exchange between Israel and Hizbullah guerrillas. However, Israeli government officials denied any connection between the two deals and Hizbullah has not commented on the issue. Nisr will be driven north to the Rosh Hanikra border crossing shared between the two enemy countries. The International Committee of the Red Cross will usher him through the border crossing and hand him over to the group's colleagues in Lebanon, said Paul Conneally, the deputy head of delegation for Israel and Occupied Territories. Nisr's Israeli citizenship will be revoked before he is deported, said Smadar Ben-Natan, his lawyer. Nisr's jail term ended a month ago, and he could have been deported at the time. Ben-Natan said authorities decided to wait, indicating that Israel was holding him for a potential prisoner exchange. "Israel would not want to send him back to Lebanon and get nothing in return. It seems reasonable that there is an exchange," she said, in a telephone interview with The Associated Press. Kuntar's lawyer, Elias Sabbagh, also said he believed Nisr's release was part of a larger deal and was a confidence building measure between the two sides. Olmert's office confirmed the deportation but said it was not a part of negotiations with Hizbullah. On Tuesday night, Lebanese TV stations reported that Hizbullah will forward a dossier to Israel outlining its failed efforts to obtain new information on the fate of missing Israeli Air Force navigator Ron Arad. Herb Keinon contributed to this report.