NABLUS, West Bank ? Israeli troops were preparing to pull back from two West Bank cities two days after President Bush urged them to begin withdrawing without delay, the Israeli defense ministry announced late Monday.

The defense ministry said that troops were preparing for a staggered withdrawal from Qalqiliya and Tulkarem early Tuesday, but no specific time was given for the pullout. Troops would continue to maintain a cordon around the cities, the ministry said in a statement.

Still, forces pushed deeper into Palestinian strongholds on Monday and Prime Minister Ariel Sharon pledged to continue the 11-day-old West Bank offensive.

At Bethlehem’s Church of the Nativity, fire broke out in the compound during a gunbattle between Israeli soldiers and Palestinians holed up inside, and the violence threatened the delicate ties between the Vatican and the Jewish state.

In the West Bank’s largest city, Nablus, dozens of gunmen surrendered to Israeli troops while scores more lay wounded on blankets on the floor of a mosque. Some of the men were dying, and doctors lacking even the most basic supplies operated on others without anesthetics.

On the 11th day of the offensive launched in response to a wave of suicide bombings, Israeli helicopters also pounded the Jenin refugee camp with missiles, and bulldozers flattened homes as gunmen retreated. Israeli officials estimated more than 100 Palestinians have been killed in the camp in recent days.

Israeli Brig. Gen. Eyal Shline said the armed men “seem to have decided to fight to the last, to make the battle as bloody as possible,” and that several blew themselves up in suicide attacks on soldiers.

Addressing a special session of parliament, Sharon said Israel’s assault was a response to a “murderous insanity which has taken hold of our Palestinian neighbors.”

He accused Palestinian leader Yasser Arafat of heading a “regime of terror” and said Israel would press on “until it has dismantled Arafat’s terror infrastructure and the murderers hiding in different places have been arrested.”

After the operation, Israeli forces will withdraw to unspecified buffer zones in the West Bank, Sharon said. He added that “the places we leave must have a responsible Palestinian leadership that will take over the areas.”

Sharon appeared to be suggesting he would only do business with Palestinians not affiliated with the Palestinian Authority.

Palestinian reaction was angry. Cabinet Minister Saeb Erekat said Sharon’s “endgame all along was to dismantle the Palestinian Authority,” and that Israel would not find Palestinians to go along with such a plan. Erekat said Sharon was defying the United States by refusing to stop the offensive immediately.

Secretary of State Colin Powell, visiting Morocco on Monday, demanded “a clear statement from Israel that they are beginning to withdraw” from Palestinian areas and added that the United States wants “to see this operation brought to an end as soon as possible.”

In Jerusalem, U.S. envoy Anthony Zinni met with Sharon. U.S. officials said he restated demands for an immediate withdrawal from the Palestinian territories.

Sharon told Zinni that Israel must remain in the areas until the anti-terror campaign is completed to prevent a return of suicide bombers, said Sharon adviser Danny Ayalon. However, Ayalon said, withdrawals would begin soon.

Palestinian residents of Qalqiliya and Tulkarem, the two cities troops were preparing to leave in the northwest West Bank, offered relatively little resistance to the Israeli occupation. Militants in other cities, such as Jenin and Nablus in the north, have been battling Israeli forces for several days.

Israeli tanks and troops continue their siege on Arafat’s office in Ramallah, preventing people from entering and leaving.

There was a widespread feeling in Israel that the timing of Powell’s trip he will not reach Israel until late this week and some wording used by U.S. officials suggested an acquiescence with continuing the offensive for a few more days.

“While (Bush) calls for an Israeli pullout ‘without delay’ … his secretary of state travels to the region in a slow, weeklong glide, even though the Americans know only his physical presence might block ‘Operation Defensive Shield,”‘ Israeli commentator Chemi Shalev wrote.

Israeli troops and tanks rumbled into the West Bank on March 29, beginning a hunt for weapons, explosives and militants who have terrorized the country with suicide bombings and other attacks.

More than 1,500 Palestinians have been arrested by Israel since then, including 500 to 600 fugitives, among them 70 to 80 involved in planning attacks on Israelis, Israeli military officials said. Troops have confiscated 2,000 rifles and uncovered 15 labs for making explosives, the officials said.

Before daybreak Monday, Israeli attack helicopters began firing missiles at the Jenin camp after militants ignored calls to surrender. Jamal Abdel Salam, a resident and activist in the Islamic militant Hamas group, said army bulldozers flattened homes, and dozen of houses were destroyed.

By early afternoon, Israeli forces controlled almost the entire camp, the army said. The military said about 150 men put down their weapons and emerged early Monday, but Abdel Salam said only women, children and the elderly left the camp. The militants were ready to fight to the death, he said.

Two Israeli soldiers were killed in the camp Monday, the military said.

In Nablus, smoke rose from the Old City, a densely populated maze of stone buildings and narrow streets. Army officials said troops controlled about half the Old City, and that dozens of gunmen surrendered Monday.

In one rubble-covered alley, gunmen were trying to pull a seriously wounded comrade to safety. One rescuer was shot in the leg and fell over the wounded man before both were carried away, as helicopters fired from machine guns. The incident Sunday was witnessed by APTN cameraman Nazeeh Darwazeh, who also saw two bodies in the streets.

In Bethlehem, Israeli troops ringing the Church of the Nativity exchanged fire with some of the more than 200 armed Palestinians who have been holed up inside for seven days.

A senior Israeli army officer, speaking on condition of anonymity, said two border policemen who were shot and wounded by Palestinians threw a smoke grenade into the compound, sparking a fire.

The fire burned for about an hour in a second-floor meeting hall above the courtyard of St. Catherine’s, a Roman Catholic church adjacent to the Church of the Nativity. It destroyed a piano, chairs, altar cloths and ceremonial cups, clerics said. Israeli troops searched Palestinian firefighters who came to extinguish the blaze, but they were eventually allowed to put out the fire by spraying water over the compound’s wall.

Sharon told parliament soldiers would surround the church until the gunmen surrender. The Franciscans, meanwhile, accuse Israel of violating a pledge not to attack the church. Church officials said the clerics were not hostages and would stay in the compound.

In his speech to parliament, Sharon also said he was willing to meet with Arab leaders anywhere without preconditions to discuss a Mideast peace proposal.

He said a recent pan-Arab call for Israel’s withdrawal from all occupied Arab lands in exchange for comprehensive peace, had “positive elements.”

But Sharon said Israel cannot accept a return of Palestinian refugees, an issue Arab nations say must be resolved before they establish normal relations with Israel.