On the eve of US President George W. Bush's visit to Israel and the region, US Secretary of State Condoleezza Rice placed the issue of settlement activity in the West Bank and east Jerusalem at center stage, telling The Jerusalem Post that "Har Homa is a settlement the United States has opposed from the very beginning." Rice, who was accompanying Bush en route to Israel overnight Tuesday, said that "the United States doesn't make a distinction" between settlement activity in east Jerusalem and the West Bank and that Israel's road map obligations, which include a building freeze, relate to "settlement activity generally." Rice's comments underlined that the settlement issue will be high on the agenda of the talks between Bush and Prime Minister Ehud Olmert. Right-wing activists set up two new outposts on Tuesday evening. According to Israel Radio, the outposts were established near Efrat and Psagot. The activists planned to expand 10 more existing outposts. Bush is scheduled to arrive Wednesday at around noon to spend 48 hours in Israel and the Palestinian Authority. From here, he will travel to Bahrain, Kuwait, the United Arab Emirates, Saudi Arabia and Egypt. Rice, with her comments, went further than US officials have previously gone toward clarifying the US position on east Jerusalem. Her comments not only seemed to set the stage for a confrontation over the issue during the Bush meetings, but also stood in sharp contrast to what Olmert has said he believes is the US position on the matter. Olmert, in an interview with the Post last week, said that when Bush thought of an overall Israel-Palestinian agreement, he had in mind an accord based on the 1967 borders "plus." "He's the only president who has ever said that," Olmert said. "His reference is '67-plus. And that's an amazing achievement for Israel." Rice's reference to Har Homa as a settlement, however, seemed to belie that belief. Nevertheless, senior diplomatic officials said that they did not see much new in Rice's position, and that the US has consistently opposed all construction beyond the Green Line, including inside Jerusalem. The official said that this was the reason Bush's letter to then-prime minister Ariel Sharon in 2004 was so important, because it recognized that there had been changes on the ground that needed to be taken into consideration when drawing up final boundaries. While referring to Har Homa as a "settlement," Rice, when asked, didn't clarify whether other Jerusalem neighborhoods over the Green Line, such as Gilo and Ramot, were also settlements in the eyes of the United States. "The important point here is that one reason that we need to have an agreement is so that we can stop having this discussion about what belongs to Israel and what doesn't," she said. Rice gave an interview to the Post and Ynet on Monday ahead of her departure for Israel. Rice described the letter as "the president's acknowledgement that these changes have taken place and have to be accommodated. This president also said it needs to be mutually agreed [upon]. So the negotiation, the agreement itself, will finally resolve these issues, and we can stop having the discussion about what's a settlement and what isn't." Rice's comments point to the longtime ambiguity in the US position toward construction in these neighborhoods, which is opposed by the Palestinians and the European Union. Traditionally the United States has refrained from describing Jerusalem neighborhoods as "settlements," but the Bush administration has been particularly critical of recently-announced building tenders in Har Homa. Olmert, while saying he is committed to Israel's obligation under the road map, has also indicated that construction would proceed in Har Homa. During his talks with Bush, Olmert is expected to try and reach clearer definitions with the US regarding construction in east Jerusalem and the settlements. The disagreement between Israel and the US over the issue of east Jerusalem and overall settlement construction will be stressed by Palestinian officials when Bush visits Ramallah on Thursday, as they hope to exert pressure on Israel to halt all settlement construction. Ahmed Abdel Rahman, a top aide to Palestinian Authority President Mahmoud Abbas, said the PA would reiterate during Bush's visit its demand for a full Israeli withdrawal to the pre-1967 borders, including east Jerusalem. "There will never be real peace unless Israel accepts the two-state solution," he said. "This means a full withdrawal from all the territories occupied in 1967. But Israel is working toward building a state for the settlers in the West Bank. Israel is also working toward changing the Arab and Islamic character of Jerusalem." Abdel Rahman said "the Palestinian security forces would not provide security to the settlers and settlements in the West Bank. All the settlements are illegal, and the settlers have no place in Palestinian territories." The PA official said Israelis were deceiving themselves by thinking that the Palestinians would accept the presence of settlements in the West Bank. "We will never accept one settler or occupation soldier on our lands," he stressed. Asked about the message that Abbas would deliver to Bush during their talks in Ramallah, the PA official said, "President Abbas will tell him, yes to peace and the two-state solution, yes to a full withdrawal to the 1967 borders, yes to a just solution to the issue of the Palestinian refugees and yes to the release of all Palestinian prisoners held in Israeli jails." He described Bush's visit as an historic event for the Palestinians, adding that the PA was hoping he would see with his own eyes the settlements and security fence in the West Bank. Despite the less than conciliatory words, Olmert and Abbas met for two hours in Jerusalem and agreed that their chief negotiators, Foreign Minister Tzipi Livni and former PA prime minister Ahmed Qurei, would begin talks on all the core issues. Agreement now, a month-and-a-half after the Annapolis conference, to take on the most intractable issues - Jerusalem, refugees and borders - was widely seen in Jerusalem as an attempt to show Bush, who is heavily invested in the Annapolis process, some progress. Under the agreement reached by Olmert and Abbas, the two of them would continue to meet on a bi-weekly basis, and Livni and Qurei would meet intensively to discuss the core issues. The two leaders would step in when problems arose, and - where needed - technical teams would be set up to assist Livni and Qurei in their work. The two stopped short of setting up working groups to deal with each of the core issues, with Israeli officials saying this was to keep Israel Beiteinu head Avigdor Lieberman from quitting the government. Lieberman has said that he would quit the government if working teams began negotiating on the core issues. Senior officials in the Prime Minister's Office said they saw no reason why Lieberman should quit the government now, saying that Lieberman was well aware that Olmert and Abbas have been discussing the "core issues" for months, and that nothing has been compromised by now letting Livni and Qurei deal with those issues as well. Tovah Lazaroff contributed to this report.