GAZA CITY -- Israel on Wednesday approved an even tougher war on Hamas, warning residents to flee southern Gaza ahead of planned bombardments of cross-border tunnels, as the Palestinian death toll passed 700.

After a brief lull to allow Gaza's beleaguered population to hunt for food and fuel, Defense Minister Ehud Barak was given the green light by the security cabinet to order a deeper offensive into Gaza towns as part of the campaign to halt Hamas cross-border rocket attacks.

But Barak has also decided to send an envoy to Cairo on Thursday to get details on an Egyptian ceasefire plan, which secured widespread international backing amid mounting concern about the scale of the civilian casualties.

Prime Minister Ehud Olmert said he hoped the talks would "lead to conditions which will allow" the end of the Israeli offensive which began on December 27 and has so far killed 702 Palestinians and wounded 3,100, Gaza medics say.

Olmert chaired the security cabinet meeting in Jerusalem which "approved continuing the ground offensive, including a third stage that would broaden it by pushing deeper into populated areas," a senior Defense official said.

The final decision will be left with Barak, the official added.

Israeli shelling and air attacks around Gaza City were halted for three hours as a humanitarian gesture. Hamas also halted rocket attacks.

People and cars quickly filled the streets of Gaza City and long queues formed outside bakeries which soon ran out of bread. Aid groups sent dozens of truckloads of food and fuel across the border during the truce.

But the fighting equally quickly resumed, inflicting new deaths. A man and his three sons and a nephew were killed in one attack at the Jabaliya refugee camp, according to Gaza medics.

Israel also warned thousands of people in the Rafah zone on the Egyptian border to leave their houses or face air strikes.

"You have until 8:00am (0600 GMT)" on Thursday, said leaflets which were dropped by the Israeli military.

The area around Rafah is crisscrossed by what the Israeli army estimates to be some 300 tunnels and what local residents have told AFP is 500 subterranean passages from Gaza into Egypt.

The tunnels are used to smuggle supplies and arms into Gaza, an impoverished enclave that Israel has virtually locked down since Hamas seized power in June 2007.

Putting a halt to the smuggling is a key element of the ceasefire plan proposed by Egyptian President Hosni Mubarak.

The proposal calls for an "immediate ceasefire," Israeli-Palestinian talks in Egypt on securing Gaza's borders, reopening border crossings and possible Palestinian reconciliation talks under Egyptian mediation.

Egypt has asked the International Committee of the Red Cross to open a humanitarian corridor from its border with Gaza for aid and evacuating the wounded, the foreign ministry in Cairo said.

The Hamas leadership announced it was studying the plan and Palestinian president Mahmud Abbas was set to go to Cairo for talks.

The United States signalled it was open to the idea of a ceasefire but the White House said Secretary of State Condoleezza Rice was clarifying details of the Egyptian plan.

Russia's top Middle East envoy met exiled Hamas leader Khaled Meshaal in Damascus on Wednesday. A Russian foreign ministry statement said Meshaal declared himself ready to take part in a "political-diplomatic solution" but that "the imposition of capitulatory conditions by Israel was unacceptable."

The Israeli government has faced mounting international criticism over its offensive, its deadliest ever in Gaza.

Cardinal Renato Martino, the Vatican's justice and peace minister, was quoted by the online Italian daily Il Sussidiario as saying Gaza had been turned into a "big concentration camp" by two weeks of Israeli bombardments.

Israel responded by saying the comments were "based on Hamas propaganda."

Hundreds of Hamas rockets fired into Israel over the past 12 days have killed four people and wounded dozens. Six Israeli soldiers have also been killed in combat.

Israel was also slammed by the United Nations which expressed outrage and demanded an independent investigation after military strikes on three UN-run schools in Gaza on Tuesday killed 48 people.

Forty-three people were killed in the deadliest strike at Jabaliya. The army said its investigation found militants had fired at Israeli forces from inside the school and Hamas militants were among those killed.

The United Nations denied this.

"Following an initial investigation, we are 99.9 percent sure that there were no militants or militant activities in the school and the school compound," Christopher Gunness, spokesman for the UN agency for Palestinian refugees, UNRWA, told AFP.