A truce between the Jewish state and Hamas-led Islamist guerrillas remained elusive despite intensive mediation bids.
Palestinians said residents of two southern villages were trapped by days of tank shelling, with medics unable to evacuate wounded. UN agencies said more than 140,000 people had been displaced. Hamas fired rockets at Tel Aviv and said its gunmen carried out a lethal ambush on Israeli soldiers in north Gaza.
With Washington's encouragement, and the involvement of Turkey and Hamas ally Qatar, Egypt has been trying to broker a limited humanitarian ceasefire for the battered enclave.
One Cairo official said it could take effect by the weekend, in time for the Eid al-Fitr festival next Monday or Tuesday, Islam's biggest annual celebration at the end of the fasting month of Ramadan.
But a US official described any truce by the weekend as unlikely, as did an Israeli security cabinet minister who said the army would need one to two weeks to complete its main mission of razing tunnels used by Hamas for cross-border raids.
"If the talk is of a humanitarian hiatus for - this is not pleasant to say - removing bodies, all kinds of things that are connected to the civilian population in the short-term, this might be weighed," the minister, Gilad Erdan, told Israel Radio.
"But I will oppose any ceasefire until it is clear both that the tunnels will be destroyed and what will happen in the post-ceasefire period - how we will guarantee that quiet for the residents of Israel will really be preserved in the long-term."
The death toll in Gaza reached 729 yesterday.