Israeli soldiers hunting a top Hamas member raided two homes Friday, killing at least four Palestinians. The clash undercut efforts by Palestinian leaders to wrap up a deal with armed groups on suspending attacks on Israelis. Soldiers blew up a house and fired more than a dozen tank shells in the two-hour battle, while combat helicopters fired machine guns toward groups of dozens of gunmen. The target of the raid - Adnan al-Ghoul, also known as "The Engineer" - was not present. Despite the clashes, Israeli-Palestinian negotiations on the terms of an Israeli troop pullback in the Gaza Strip and the West Bank town of Bethlehem made "real progress" Friday, a Palestinian official said. The two sides resolved the key dispute over control of the main north-south road in Gaza. Another meeting was scheduled for later Friday to conclude a deal, the official said. A troop pullback would be the first major step by Israel toward implementing a U.S.-backed peace plan, which calls on Israel to return to positions it held before fighting broke out in September 2000. An Israeli pullback, coupled with a promise by Palestinian groups to halt attacks on Israelis for three months, could be a major boost for Washington's peace initiative, the "road map" to Palestinian statehood by 2005. It was not immediately clear how Friday's raid against Hamas would affect the Palestinian Authority's efforts to wrap up its deal with Hamas and Islamic Jihad on suspending attacks. The Damascus-based leaders of the groups, Khaled Mashal of Hamas and Ramadan Shalah of Islamic Jihad, had agreed to a suspension earlier this week, but a formal announcement has been delayed - apparently until the weekend - to add final touches. Hamas leaders in Gaza were not immediately available for comment Friday, but have warned that renewed Israeli military strikes could jeopardize a deal. Israel has shrugged off the emerging truce as an internal Palestinian matter. "Such operations will continue until we have a cease-fire," said Avi Pazner, an Israeli government spokesman. "If and when the cease-fire will be put into effect, then we will look again at that kind of (operation)." **PHOTO CAPTION*** A Palestinian stands atop the ruins of the building while holding his weapon as others collect belongings from the rubble of a home destroyed by Israeli soldiers in the village of Mujarkha after daybreak, south of Gaza City Friday, June 27, 2003. (AP Photo/Rick Bowmer)