HIGHLIGHTS: Israeli Occupation Army Changes Tactics++Despite Prevailing Odds, Annan Expects UN Report on Jenin++ Details About Mideast Conference Expected Tuesday++White House Plays Down Serious Repercussions of Congress Pro-Israel Resolutions++STORY: Changing tactics from widespread incursions into Palestinian-ruled territory, the Israeli occupation army, under intense international pressure, has changed tactics to taking positions on the outskirts of Palestinian cities and towns and launching short raids whenever and wherever it deemed necessary. On the diplomatic front, the United States, the European Union, Russia and the United Nations appeared to be preparing for calling for a Mideast conference following visits to Washington next week by Israeli Prime minister Ariel Sharon and King Abadallah II of Jordan. Contacts between the White House and the Saudis on Prince Abdallah's peace initiative are meanwhile intensifying. On the US-Israeli domestic front, the White House tried hard to play down, the serious repercussions in the Arab World of a pro-Israel resolution adopted by Congress in Washington Thursday.

An Israeli Soldier & a Palestinian Policeman Killed in Nablus
Israel meanwhile launched a 3-hour military operation in Nablus. Heavy gunfire erupted when Israeli occupation forces converged on a three-story building on the edge of Nablus' Old City or casbah, the scene of fierce fighting last month between the two sides.
In addition to a Hamas activist who was killed, two others were wounded and were being treated in hiding, sources in the Islamic militant group said. A Palestinian policeman was reported killed in a clash with Israeli troops in another part of the city. The army said one Israeli soldier was killed and two injured.
The targeted building was in Nablus' main commercial district, and about 16 surrounding shops were destroyed in the fighting, neighborhood residents said. They said they cowered in inner rooms of their apartments as the Israelis fired tank shells and heavy machine guns. Israel radio said the occupation army captured a car rigged with explosives and blew it up safely.
STANDOFF AT BETHLEHEM
Still, a bloody skirmish at the Church of the Nativity in Bethlehem dampened hopes for prodding Israel and the Palestinians into negotiations.
The Israeli occupation army said the curfew in the heavily Christian Palestinian villages of Beit Jalla and Beit Sahour, next to Bethlehem, would be lifted later in the day to let worshippers attend Good Friday services.
In Bethlehem, Israel is insisting that the armed men inside the Church of the Nativity surrender or accept exile. Palestinian officials had proposed taking them to the Gaza Strip. Bethlehem's Palestinian mayor, Hanna Nasser, suggested solving the standoff with the same formula that ended the siege of Yasser Arafat's headquarters in the West Bank town of Ramallah a day earlier
On Thursday Israeli occupation troops fired at Palestinians walking into Manger Square, killing one and wounding at least two who staggered back into the shrine, the army said. Palestinians returned fire.
Israeli Military Operations Near Qalqilya & Hebron, Al-Khalil
Elsewhere in the West Bank, the Israeli military said two Hamas members were arrested overnight in the village of Bidya, east of the northern town of Qalqilya, and that special forces entered the village of Duma, southwest of Hebron, and arrested three Palestinians.

Bush Sets Terms For Mideast Peace
President Bush set tough terms Thursday for a Palestinian state, saying it must be democratic and not based on a foundation of terror and corruption.
Bush, at a news conference, also renewed his description of Israel's hold on the West Bank as an "occupation" and said it must yield to Palestinian statehood.
Secretary of State Colin Powell, meanwhile, announced an international conference would be held this summer to try to advance the peace efforts.
Officials from Europe, the United Nations and Russia are joining the United States in promising to work for settlement, he said.
Bush, in his earlier remarks, was not specific about how much land he wants Israel to relinquish for a Palestinian state. That critical issue is likely to be aired at a White House meeting Tuesday with Israeli Prime Minister Ariel Sharon.
Bush said important progress was being made toward ending the violent standoff in the Middle East.
Speaking after a meeting with European leaders, the president said he expects more progress when he meets in Washington next week with Sharon and King Abdullah II of Jordan.
Powell Announces Mideast Conference
Powell urged Israel to lift restrictions on Palestinian travel and said Palestinian leader Yasser Arafat should also take steps to bring calm to the region.
He said that Arafat, since his virtual house arrest had ended, now "has an opportunity to show leadership, ... to say to the Palestinian people, `This is the time to find a peaceful way forward.'"
"Mr. Arafat, I hope, will understand that he doesn't have any more chances to seize this kind of opportunity," Powell said.
U.N. Secretary-General Kofi Annan, standing alongside Powell, said he expected a U.N. report to be prepared on Israel's attack on the Jenin refugee camp "even if we cannot get on the ground."
European Union leaders, meeting with Bush on trade and other issues, gave their backing to the U.S. diplomatic efforts. "We attach the utmost importance to the work that we can do jointly in the Middle East," said Spanish Prime Minister Jose Maria Aznar, who currently holds the presidency of the European Union.
Powell seemed optimistic this week that a breakthrough would follow the freeing of Arafat from Israeli house arrest.
Until the Bethlehem incursion is resolved, efforts to work out new security arrangements and consideration of another trip by Powell to the region are on hold.
Senate Passes Resolution Backing Israel

The U.S. Senate on Thursday overwhelmingly approved a resolution expressing solidarity with Israel in the Middle East conflict; a move the House of Representatives was set to follow within the hour.

With scant dissent, the Senate passed a resolution that said the United States and Israel are "engaged in a common struggle against terrorism," and condemned Palestinian bombings.
The Bush administration tried to stall the pro-Israel resolutions, fearing they would damage Middle East peace-seeking efforts.
Putting the best face on the votes, White House spokesman Ari Fleischer said they were coming at a less sensitive time in negotiations, after the deal that lifted the Israeli siege of Palestinian leader Yasser Arafat's compound in Ramallah and other developments.
PHOTO CAPTION
The Bush administration called a proposed Middle East peace summit 'premature,' saying President Bush, in close coordination with Saudi Crown Prince Abdullah, planned to step up pressure on Israel and the Palestinians to end the Middle East crisis. Bush and Abdullah are shown at the president's home in Crawford, Texas, April 25. Photo by Kevin Lamarque/Reute