While Israeli sources quoted a senior security source as saying the Israeli army halted demolitions and was pulling out on Monday, an Israeli commander in Gaza said military operations are still running.
"I don't know if I can say Operation Rainbow is over. We are taking a deep breath and this goes on," a senior military official added.
But the army did lift a blockade that had cut Rafah off from the rest of the Gaza Strip for nearly a week, saying it was easing conditions for the beleaguered population.
Wary residents venturing out in Rafah's Tal al-Sultan and al-Brazil districts begged for water as they confronted demolished homes, flattened greenhouses and torn-up streets flowing with raw sewage after Israeli tanks rumbled out.
"It looks like an earthquake hit," resident Sami Fuja said.
Meanwhile, Israeli military officials gave a higher toll than the Palestinian figure of 42, saying troops had killed about 40 resistance fighters and at least seven civilians.
They also claimed the destruction of three smuggling tunnels.
Palestinian prays in burnt Ali Bin
Abi Talib mosque in Tal al-Sultan
Major-General Dan Harel said 56 "structures" [homes] were also destroyed or badly damaged.
The UN relief agency UNRWA and other rights groups said the army had demolished 180 homes.
But international outrage over the Rafah raid has prompted Prime Minister Ariel Sharon to prepare a modified withdrawal plan from occupied Gaza for cabinet approval next week.
In response, Egypt has pledged to send "advisers" to help the Palestinian Authority take control after any pullout.
The deployment of Egyptian representatives as advisers to the Palestinian Authority would be part of a joint plan to help fill the vacuum after Israel withdraws, Palestinian officials said.
The plan was at the centre of talks on Monday between Palestinian President Yasir Arafat and Egyptian intelligence chief Umar Sulayman in the West Bank, they said.