The children were outside playing in the yard when local warning sirens sounded. Caregivers rushed the children into the nursery's bomb shelter just moments before the rocket struck.

Palestinian forces fired at least three more rockets and two mortars shells at other Jewish communities in the area.

Senior Palestinian Authority officials told Ha'aretz this week that Hamas operatives who recently traveled to Iran for training have returned to the Gaza Strip armed with plans and blueprints for the development of locally-produced rockets with increased range, more explosive power and greater accuracy.

In other Gaza violence, a Hamas gunman was killed after engaging Israeli troops along the Gaza security fence early Friday morning.

Earlier in the week, Barak approved the withdrawal of Israeli troops from the Jenin area in northern Samaria and the deployment of PA police there, the easing of travel restrictions imposed on the Palestinians to prevent terrorist infiltrations, and the transfer of more military equipment, including 600 armored vehicles, to Palestinian forces loyal to US-backed leader Mahmoud Abbas.

The gestures were part of a list prepared by Barak apparently under pressure from US envoy General James Jones and Secretary of State Condoleezza Rice to show progress on the ground before President George W. Bush visits the region in May.

But in a recent meeting with Jones, The Jerusalem Post cited Barak as warning that the gestures are just as likely to backfire and present Israel with increased security problems as they are to bolster Abbas and improve security for Israel.

Barak noted that just as it had in Gaza, Hamas could seize power in Judea and Samaria and capture all the weapons given to Abbas to prevent just such an occurrence.

Despite significant advantages in manpower and weapons, including a fresh supply of US-made arms, forces loyal to Abbas were easily defeated by the Iranian-backed Hamas in Gaza. Following the victory, Hamas put the captured American weapons on display before turning them on Israel.

The three casualties occurred during a rocket attack on the battered southern Israel town of Sderot. The victims, including a Sudanese refugee seeking haven in the Jewish state, were lightly wounded by shrapnel.

Earlier, a rocket fired at a nearby kibbutz landed in the backyard of a family home, damaging it and several neighboring houses.

Late Wednesday evening, a 14-year-old Jewish boy sustained moderate injuries when Palestinian terrorists detonated a roadside bomb against the vehicle in which he was traveling near the biblical Judean town of Hebron.

Members of US-backed Palestinian leader Mahmoud Abbas' Fatah party claimed credit for the attack.

Speaking to reporters in Tel Aviv ahead of a meeting with Palestinian Authority Prime Minister Salaam Fayad, Mr. Barak said he had also agreed to ease travel restrictions placed on the Palestinian Arabs to hinder terrorist infiltrations.

Earlier this week, Barak signed off on the deployment of Palestinian Authority troops in and around the northern Samaria terrorist hub of Jenin, and the withdrawal of Israeli forces from the area.

The latest gestures by Israel's defense establishment come just days after US officials in the region to monitor Israeli and Palestinian compliance with peace obligations concluded that the Palestinian Authority is making little or no effort to combat anti-Israel terrorism.

The monitoring team, headed by General William Fraser, faulted Palestinian leader Mahmoud Abbas for only truly going after extremists when they were threatening his rule, and said that he had opted to merely "contain" anti-Israel terrorism to the extent necessary to avoid international pressure.

Israeli opposition leader Benjamin Netanyahu called attention to the discrepancy between the PA's promises and its actions during a speech at a conference at the Jerusalem Center for Public Affairs on Wednesday, and insisted that Israel must stop viewing the purportedly "moderate" Abbas as a "subcontractor for our defense."

"The idea of entrusting the PA with our security has failed in the past in Gaza and it will also fail in Judea and Samaria," Netanyahu said at a conference at the Jerusalem Center for Public Affairs. "The notion that we will provide the PA with weapons in its present state and believe that those weapons will protect us is a nonsensical one."

Israeli business newspaper The Marker reported this week that earlier this month someone in the Prime Minister's Office acting under direct orders posted three videos to YouTube containing graphic footage of the massacre of eight young Jewish bible students by an Israeli Arab terrorist in Jerusalem.

An Israeli government source acknowledged that the videos were posted as part of an official PR campaign, and said that YouTube will become a regular part of Israel's efforts to raise awareness of the threats facing its citizens and the legitimacy of its own war on terror.

The videos can be viewed below, but readers are warned that both contain graphic footage.

Stop the terror, stop the bloodshed

Emergency call, March 7, Jerusalem

Carter and Annan sent their proposal to Israel several weeks ago, and noted that South African Archbishop Desmond Tutu and former Irish President Mary Robinson would also be part of the mediation team.

Carter, Annan, Tutu and Robinson have for decades been among the foremost international critics of Israel's right to defend itself against Arab Muslim terrorism and have regularly lent credibility to groups like Hamas that openly reject the Jewish state's very right to exist.

Nevertheless, Israel remained diplomatic in its response to what many viewed as a duplicitous offer of help by explaining that "at this time it would not be right to introduce more players into a diplomatic process that is already in a complex stage."