JERUSALEM -- Israeli troops kept Yasser Arafat's headquarters and Bethlehem's Nativity Church under tight siege on Monday and a U.S. envoy seemed to make little progress in talks on the crisis with the Palestinian leader.

"I would not say that it was a positive meeting," Mohammed Rashid, an adviser to Arafat, told Reuters after the 90-minute session with U.S. Assistant Secretary of State William Burns at the Palestinian president's encircled compound in Ramallah.

Rashid complained that Israeli troops had prevented senior Palestinians from attending.

Another Arafat aide, Nabil abu Rdainah, said the Palestinian leader had demanded an unconditional Israeli pullout from all the areas occupied by troops in a West Bank offensive launched on March.

Declaring the end of "this stage" of the crushing assault in Palestinian cities, villages and refugee camps, Israeli prime minister Ariel Sharon pulled troops out of Nablus and most of Ramallah on Sunday.

But Israeli armor remained at Arafat's compound and around the Bethlehem church revered as the birthplace of Jesus to hammer home demands for the surrender of militants at the two sites.

Television footage showed a crowd milling around one of the men as he lay bleeding on the street. Palestinian officials said Israel was to blame because it had arrested or killed Palestinian policemen who could have kept order.

U.S. secretary of state colin powell said on sunday he was pursuing peace efforts and wanted a non-violent end to the standoffs in bethlehem and ramallah. "let's not try to solve it through the use of any violence," powell said, amid european union calls on israel not to raid arafat's office, where he has been confined since march 29. arafat's fatah faction warned israel not to kill its leader, saying in a statement that this would be "playing with fire". powell is seeking a ceasefire that eluded him during a recent mission to the region when he failed to secure a full israeli withdrawal from reoccupied cities. the palestinians say no truce can hold until the army quits the cities they are supposed to rule under interim peace deals. "security coordination will not be resumed because sharon has created a sea of blood and hatred between us and the israelis,"jibril al-rajoub, head of preventive security in the west bank, told reporters at his ruined headquarters. after meeting arafat, burns toured the badly damaged ministry of education headquarters in ramallah. he said the damage at the building and at facilities used by non-governmental aid agencies was "very troubling". "i think it's going to be critically important to rebuild the civilian infrastructure...to be able to meet the needs, provide the services that palestinians so desperately need," burns told reporters. he said he would head a u.s. delegation to a major donor conference in europe at the end of the week that would focus on how to begin the rebuilding process swiftly. divisions in church in bethlehem, signs of division emerged among at least 200 people trapped in the church, who include policemen and clerics. a conversation overheard via a mobile telephone left open in the church following an earlier call appeared to reveal a sharp debate between a gunman and a palestinian official. "if you want to fire, go outside. don't fire from inside the church," said the official in the church. "we are not going to surrender. you have to tell the people to stand with U.S." was the reply. "you have got to have a conscience," the official responded. israel has pledged not to storm the shrine. palestinians say the gunmen have not fired their weapons since entering it. gunfire has frequently erupted around the church, and the israeli army says its soldiers have only responded when shot at. in the gaza strip, israeli soldiers killed two gunmen on the edge of bureij refugee camp overnight and shot dead another man who the army said had tried to infiltrate a jewish settlement. israel's offensive has provoked fierce criticism from abroad and prompted the u.n. security council to authorise a mission to discover what happened in the shattered jenin refugee camp. palestinians say hundreds of civilians may have been killed there, including many whose homes were shelled or bulldozed over their heads. israel denies this, saying it killed a few dozen gunmen as the army lost 23 dead in vicious street fighting. at least 1,295 palestinians and 453 israelis have been killed during the 18-month-old palestinian uprising.