Palestinian caretaker government with Salam Fayyad as PM replaces emergency cabinet.
Dozens of Palestinians from the list of 256 prisoners leave for West Bank.
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The transfer is scheduled to be completed by around midday.
Malouh, 61, was arrested in 2003 and is said to be ill.
A member of the Palestine Liberation Organisation’s executive committee, he is considered close to Abbas and could serve as a mediator with Hamas.
Israel continues to hold about 10,500 Palestinian prisoners.