The military operation, one of the largest in recent months, came two days before the first Israeli-Palestinian summit since 2000, and a week ahead of talks between Israeli Prime Minister Ariel Sharon and U.S. President George W. Bush on a new peace plan.
U.S. Secretary of State Colin Powell, who met separately with Sharon and Palestinian Prime Minister Mahmoud Abbas over the weekend, said Thursday that both sides need to compromise to get going on the "road map" to Mideast peace.
Powell made it clear that Sharon was causing much of the problem and said he hoped the prime minister could work something out with his new Palestinian counterpart.
The raid targeted the Palestinian town of Beit Hanoun and came in response to rocket fire from Gaza into Israel, the army said. During the raid, troops demolished five houses of Hamas militants and exchanged fire with Palestinian gunmen.
Doctors said that for four hours, troops prevented ambulances from evacuating the dead and wounded. Among those left unattended was a 12-year-old boy, Mohammed Zaaneen, who was shot in the head and eventually carried out of the combat zone to an ambulance waiting on the outskirts of town. He died en route to a hospital, doctors said.
In the past, troops have kept ambulances from areas of fighting. An army commander, Col. Yoel Strik, would only say he was unaware of the boy's death.
Also killed were two 15-year-old boys and two gunmen, doctors said. Seventeen Palestinians were wounded.
Beit Hanoun resident Marwan Shabat, 55, said the incursion was a continuation of "Al Naqba," or "catastrophe," the Palestinians' name for the events of the 1948 Mideast war when about 700,000 Palestinians fled or were forced out of their homes.
"The Naqba for the past 55 years has been the same, but if the occupiers think they can uproot us from our town, they are mistaken," said Shabat, a school teacher. He said troops broke into his home, smashed furniture and beat three of his sons during the raid.
Hours later, about 15,000 people filled the streets of Gaza City and hundreds turned out in the West Bank city of Ramallah to mark the "Naqba," Arabic for "catastrophe."
In Gaza City, demonstrators fired rifles into the air, waved Palestinian flags, and wore T-shirts with a picture of veteran Palestinian leader Yasser Arafat.
At noon, a three-minute siren rang out in parts of the West Bank and Gaza. Motorists stopped their cars. Thousands of marchers held up their fingers in a V-for-victory sign and Palestinian legislators placed their hands over their hearts,
Later, the wail of Muslim prayer calls and the clang of church bells filled the air as Arafat's annual Naqba speech blared over loudspeakers. Many of the demonstrators carried banners with the names of former hometowns.
Arafat said Israel must withdraw from all the lands it occupied in the 1967 Mideast war, and that Palestinian refugees must be allowed to return. "For the past 55 years, martyrs…have fallen for the sake of the homeland, freedom and the return of the refugees," he said.
Abdel Aziz Rantisi, spokesman for the militant group Hamas, said in a telephone interview that Palestinians "are reiterating their commitment to their homeland, their commitment to go on this march of resistance until liberation."
The Gaza rally was also intended as a show of support for the beleaguered Arafat whom Israel and the United States have been trying to sideline.
Ramzi Fattah, 19, a gunman for Arafat's Fatah movement, appeared at the rally wielding an M-16 and wearing an Arafat T-shirt. Arafat "is the only leader accepted by the Palestinians," he said. "He is the hero of peace and war and he's the only one who can speak on our behalf — no one else."
Thursday's military operation came as Sharon and Abbas prepared for their Saturday night meeting. On the agenda is the "road map," a three-year, three-stage blueprint beginning with a halt to 31 months of Mideast violence and leading to creation of a Palestinian state.
Israel insists that before it makes any peace moves, the Palestinians must crack down on violent groups responsible for attacks against Israelis.
However, a senior Palestinian official, speaking on condition of anonymity, said Wednesday that the new Palestinian government headed by Abbas would not move against the militants unless Israel first formally accepts the "road map" plan.
Earlier this week, Sharon cast doubt on the survival of the peace plan by telling an interviewer he did not support dismantling several Israeli settlements located deep in Palestinian territory.
Opponents of Israel contend its settlements violate international law.