Describing the ground offensive in Gaza as unavoidable, Israel has pledged to extend and intensify the operation amid heavy exchange of fire between troops and the Hamas militants that have taken the death toll in the coastal territory beyond 500.

Palestinian sourcesin Gaza said that 23 Palestinians have been killed in the Israeli offensive, three of them top Hamas militants, as Israeli troops targeted traffic routes bisecting the Hamas ruled territory in two parts.

Shells fired by Israel Defence Forces troops exploded in the center of Gaza City's main shopping area, leaving five dead and dozens wounded, the sources said.

An Israeli reconnaissance plane fired a missile at the home of Democratic Front for the Liberation of Palestine, Muhammad Abid Barbakh, killing him and four others, Palestinian news agency, Ma'an, reported.

They were identified Barbakh's father, Abid, his two brothers Mahdi and Yousif and his nephew Mousa.

Thirty IDF soldiers were also wounded in the clashes, two of them seriously.

Black smoke billowed all across the Strip as Israeli tanks and troops from elite brigades marched into the Hamas ruled territory on Saturday evening, following bomb-sniffing dogs to ensure that their routes had not been booby-trapped.

Defence Minister Ehud Barak told the cabinet that while the operation was bound to be difficult, it will be extended and intensified as necessary.

"War is full of surprises and difficult challenges but our best fighters are leading the operation," Barak said.

Prime Minister Ehud Olmert on Sunday morning addressed the parents and families of IDF troops in the Gaza Strip and said that the ground operation was unavoidable.

"It is inconceivable that in a responsible and determined country, the home front would be a target for attacks without its powerful, daring and skilled army protecting it," the Prime Minister said at the beginning of a weekly cabinet meeting in Tel Aviv.

Israeli army has claimed that its Air Force has killed senior Hamas activist Hussam Hamdan, who was in charge of Grad-type rocket launches into the southern Negev cities of Beersheba and Ofakim in a strike on Khan Yunis city in southern Gaza Strip.

Another senior Hamas activist, Muhammad Hilo, was also killed in the same air strike. Hilo was in charge of the Hamas special forces in Khan Yunis.

Hamas remained defiant, vowing the Gaza would become a cemetery for the Israeli army that would pay a high price for its invasion.

The US blocked an attempt in the powerful UN Security Council to express serious concern over the Israeli ground offensive in Gaza after eight days of air strikes and to call for an immediate ceasefire, asserting that it would "not be adhered to and have no underpinning for success."

In his weekly radio address yesterday, President George W Bush [Images] called on Hamas "to turn away from terror" and rejected calls for a unilateral ceasefire that he said would allow the Islamists to continue hitting Israel with rockets.

Israel's air campaign against Gaza began on December 27 after an unraveling, six-month truce expired.