The BBC's Christian Fraser, who finally got into the Gaza Strip from Egypt for the first time on Friday, says the situation for Palestinian families in Rafah is tough.

Our correspondent says that while there have been targeted Israeli strikes in the town, there is much collateral damage as well, with a housing block and a playground among the sites affected.

Israel has been bombing heavily along the border area, with the aim of destroying tunnels running beneath the border between Gaza and Egypt.

Conditions for Palestinian families seeking refuge in a UN-run school in Rafah are very difficult, our correspondent says. Food and electricity supplies are limited and there is no running water.

'Vital component'

Israeli military officials said 40 overnight air strikes on Gaza targeted smuggling tunnels, rocket launching points, weapons stores and a militants' training camp.

The bodies of 23 people were later recovered in the Tel al-Hawa district of Gaza City, medics said.

Militants also continue to fire rockets from Gaza into Israel. About 10 were launched on Friday but caused no injuries, the Israeli army said.

Asked on Israel's Channel 10 TV station if the country would act unilaterally to end the conflict, Foreign Minister Tzipi Livni said it was down to the security cabinet to make that decision.

"I have said the end doesn't have to be in agreement with Hamas but rather in arrangements against Hamas," Ms Livni said.

The cabinet is expected to meet on Saturday, according to reports.

Speaking at the signing of the deal on arms smuggling with Israel, US Secretary of State Condoleezza Rice said she hoped it would ensure Gaza could "never again be used as a launch pad" for attacks on Israel.

The supply of arms to Hamas and other groups in Gaza was a "direct cause of the current hostilities", Ms Rice said.

"It is therefore incumbent upon us in the international community to prevent the rearmament of Hamas so that a ceasefire will be durable and fully respected," she said, adding that she was also concerned to end the suffering of Palestinians in Gaza.

Ms Livni, in Washington, described the memorandum of understanding as "a vital component for the cessation of hostilities".

'Final act'

Meanwhile, talks have continued in Cairo between Israeli and Egyptian officials on reaching a ceasefire agreement.

Hamas was also invited back to Cairo on Friday for more talks, an official told the al-Jazeera network.

After meeting Palestinian Authority leaders in the West Bank, UN Secretary General Ban Ki-moon called on Israel to end the fighting.

"I would like to see an immediate ceasefire," he said, adding that a deal between Israel and Hamas to stop the conflict might be possible within the next few days.

Israel has said any ceasefire must be "durable and sustainable".

Hamas leader Khaled Meshaal said they would not accept Israeli conditions for a ceasefire.

Earlier, Israeli government spokesman Mark Regev told the BBC that Israel wanted a prompt end to the violence.

"The diplomacy now is in high gear. Hopefully we're entering the final act. We want this to be over as soon as possible," he said.

Meanwhile, a teenager reportedly died during anti-Israeli protests in the West Bank on Friday.

He was killed as violence broke out between demonstrators and Israeli soldiers in the West Bank town of Hebron, reports said. Clashes were also reported at the Qalandya checkpoint.

The Israeli army had earlier closed all access to the West Bank for the next two days following a call by Hamas for all Palestinians to observe what it called a day of wrath after Friday prayers.

The Palestinian Authority issued a similar call to action to followers of Fatah, a rival Palestinian faction to Hamas.

In Gaza City, tens of thousands of mourners took to the streets for the funeral of a top Hamas leader, Said Siyam, who died when his brother's house was bombed on Thursday.

The senior UN official in Gaza, John Ging, meanwhile described as "total nonsense" claims by Israel that militants had fired from a UN compound shelled by Israel on Thursday.

Health officials in Hamas-controlled Gaza say at least 1,105 Palestinians have been killed and 5,100 wounded since Israel launched an operation on 27 December to end rocket attacks against its people.

Thirteen Israelis - three of them civilians - have died, while 233 soldiers have been wounded, the Israeli army says.