Some Israeli officials question PM Netanyahu's insistence on Palestinian recognition of Israel as a "Jewish state," and Leonard Fein calls the demand frivolous. Nabeel Shaath says settlement construction must stop. An Israeli general proposes a plan for revival in Gaza. Palestinians and settlers compete over planting, olive harvesting. Palestinians reiterate they may seek UN recognition. UN officials say they support a Palestinian state next year. Israeli forces wound one Palestinian in Gaza, arrest 16 in the West Bank. Ha'aretz says Palestinian and Jewish terrorists should be treated equally. Israel's formulae for the Gaza blockade are revealed. Rightists plan a memorial for Kahane in Jerusalem. MK Dichter cancels a trip to Spain, fearing arrest. Aaron David Miller says that if PM Rabin were alive today, we would have peace. Dennis Ross tells Israelis failed talks could imperil their security. Hamas officials say another battle with Israel is imminent. Disputes over the Church of the Holy Nativity may be resolved. Raja Khalidi questions the notion of "economic peace." The JTA looks at the role of the Jewish Diaspora in peace. Rep. Eric Cantor proposes reassigning aid to Israel. Israel and the Vatican spar over the occupation.