The US embassy and Israeli Foreign Ministry declined to comment. But the strong displeasure that Rice voiced during her recent visit to Israel meshes with US President George Bush's criticism of settlement expansion after meeting with Palestinian President Mahmoud Abbas last month.

Separately, Israeli military bulldozers began knocking down former Egyptian resort homes in the Gaza Strip, heading off pullout opponents who planned to move into them to reinforce anti-withdrawal resistance. Young settler activists screamed at the soldiers, "Jews don't expel Jews", and climbed on and under a bulldozer to block its path.

They scuffled briefly with soldiers who dragged them away, and military officials said one Israeli civilian was slightly injured and taken to a hospital.

Stern Rice

Israeli officials present at last week's meeting where Rice criticised Israel's settlement expansion said she did not threaten any particular penalty. But they said she was displeased by construction she saw when travelling from Jerusalem to the West Bank town of Ram Allah for meetings with Palestinian leaders.

Hardline settlers are opposing the
planned Israeli pullout

The officials spoke on condition of anonymity because of the sensitivity of their positions.

Friction between the US and Israel has surfaced over different readings of Bush's April 2004 statement that a peace settlement would have to take Israel's main settlement blocs into account.

Israel continues to build in its largest settlement, Maaleh Adumim, and other established West Bank communities, and to expropriate Palestinian land in annexed east Jerusalem, which the Palestinians claim as capital of a future state.

US stand

The US maintains that new construction on land the Palestinians claim for a future state violates the terms of the US-backed 'road map' peace plan, which Washington hopes to revive after Israel pulls out of the Gaza Strip and four northern West Bank settlements this summer. The long-stalled plan calls on Israel to freeze all settlement activity, while requiring the Palestinians to dismantle armed resistance groups.

Israeli officials said Rice said the US wouldn't be coerced to accept new facts on the ground that Israel is creating in its effort to influence a final peace deal.

Israel has to stop the settlement expansion before it becomes a problem, the officials cited her as saying.

After meeting with Abbas last month, Bush cautioned that "Israel should not undertake any activity that contravenes road map obligations or prejudice final status negotiations with regard to Gaza, the West Bank and Jerusalem".

Rice visited the region to promote coordination between Israel and the Palestinians on the pullout. All sides recognise that without coordination, Palestinian fighters are liable to attack withdrawing settlers and the security forces evacuating them, to create the impression that Israel is being driven out.

Continuing strife

Clashes between the two sides have escalated in recent weeks. A second Israeli teenager wounded last week by Palestinian fighters near the West Bank city of Hebron died on Sunday, hospital officials said.

Israeli bulldozers destroyed 
several cottages in the Gaza Strip

Later in the day, an abandoned Palestinian store in Hebron was set ablaze, and a Palestinian man said he was beaten by Jewish settlers near a Jewish shrine in the city, West bank police spokesman Shlomi Sagi said. The man was taken to a hospital with light-to-moderate head injuries, Sagi said.

In Gaza on Sunday, Israeli military bulldozers began knocking down eight dilapidated seaside buildings that Egyptians had used as vacation cottages before Israel captured Gaza in 1967, military officials said. Pullout opponents had planned to bring reinforcements into the buildings near the Shirat Hayam settlement.

The area where the buildings are was declared a closed military zone for the planned demolition operation, military officials said. The zone is to remain closed until the demolition and rubble removal are complete, they said.

The homes are near the derelict beachfront hotel in Gaza where hundreds of pullout opponents had barricaded themselves last week.