GAZA CITY, Gaza Strip (AP) - Israeli troops stormed a Hamas stronghold early Thursday and exchanged fire with dozens of masked gunmen in the most intense battle in Gaza in 31 months of fighting. Twelve Palestinians, including two children and a top bombmaker, were killed.

The violence came just a day after international mediators presented a new peace plan, the so-called ``road map'' to Palestinian statehood, and Mahmoud Abbas was sworn in as Palestinian prime minister. Abbas, an outspoken critic of violence against Israel, has said one of his priorities would be to disarm Palestinian militias.

The target of the raid was Yousef Abu Hein, a top Hamas bombmaker, but Israeli officials did not link the operation to a Hamas suicide bombing in a Tel Aviv pub in which a waitress and two musicians were killed Wednesday.

An adviser to Israeli Prime Minister Ariel Sharon said Israel would not give Abbas, also known as Abu Mazen, a grace period. ``We can't wait until Abu Mazen gets his act together,'' said Sharon aid Zalman Shoval. ``The faster he moves to halt terror, the quicker Israel will be able to halt these operations.''

Palestinian officials accused Israel of trying to sabotage the road map, which Israel has not accepted in its current form.

The raid was meant to ``create more provocation, to push for more Palestinian reaction to the Israeli aggression,'' Mohammed Dahlan, a senior Palestinian security official, said after Abbas chaired his first Cabinet meeting.

Heading to the Middle East, Secretary of State Colin Powell on Thursday urged Israel and the Palestinian Authority to begin talks on the peace plan.

``We need to see the end of terror - and actions on the Israel side as well,'' Powell said in Madrid.

The Gaza City raid began around 2 a.m. with tanks, jeeps and undercover troops in passenger cars entering the Shijaiyah neighborhood, a Hamas stronghold. More than 200 gunmen, many wearing black masks, rushed to the scene, and mosque loudspeakers called for a ``jihad,'' or holy war.

The fighting continued into late afternoon. At one point, soldiers surrounded a four-story apartment building belonging to the Abu Hein clan, and ordered several dozen residents to get out. Yousef Abu Hein, 31, and two brothers, Ayman, 29, and Mahmoud, 38, remained inside, exchanging fire with soldiers. Troops blew up the building, and the three brothers were killed.

The explosion was so powerful that more than a dozen buildings were damaged.

After daybreak, hundreds of bystanders thronged the area. An AP reporter saw two boys, ages 12 and 14, getting hit by Israeli fire as they tried to run away from a burst of shooting. The 14-year-old was struck by a bullet in the neck, and doctors later said he was paralyzed from the neck down.

Among those killed were eight gunmen, two adult civilians, including a mentally handicapped man, and two boys, ages 2 and 13, doctors said. Sixty-five Palestinians were wounded, including 15 who were in critical condition.

Two-year-old Amer Ayad was hit by a bullet to the head while he was near a window in his home, said his father Ahmed, a blacksmith. ``Is this the new peace President Bush promised?'' Ayad said. ``They wrote the answer using the blood of my son.''

Eight Israeli soldiers were wounded, one seriously, the military said.

Despite the new wave of violence, there was some hope that the peace plan will succeed in ending the fighting where others have failed. The road map is supported by a rare global consensus that neither of the warring sides wants to rebuff. It comes at a time when U.S. clout in the Middle East is at a high point in the wake of Saddam Hussein's ouster in Iraq.

``For the first time in a very long time, Israel and the international community have a partner to go back to the table with,'' United Nations envoy Terje Roed-Larsen told The Associated Press.

The two sides started the process at odds. Sharon's office said he had received the document ``for the purpose of formulating comments on the wording.'' Palestinian Foreign Minister Nabil Shaath, in contrast, called for ``implementing the road map immediately.''

Acting U.S. Consul-General Jeffrey Feltman said the road map is a guideline, ``not a sacred text.'' Larsen also said implementation would be negotiated, and a diplomatic source said the United States might dispatch an envoy for the task.

But Larsen said the content of the agreement is not open for negotiation.

The three-year outline starts with a Palestinian crackdown on terror groups and an Israeli freeze on Jewish settlements in the West Bank and Gaza Strip, combined with a ``progressive'' Israeli pullout from the autonomous Palestinian zones its troops have reoccupied during the current round of fighting.

A second phase, which could begin as early as the end of the year, would see the creation of a Palestinian state with provisional borders. Tough issues like final borders, the conflicting claims to Jerusalem and the fate of millions of Palestinian refugees and their descendants are left for the last phase.

Both governments say they want to end violence that has killed more than 2,300 people on the Palestinian side and more than 760 people on the Israeli side since September 2000.

Israel's most important objection is carrying out its part - including a politically difficult freeze on Jewish settlements - at the same time as the expected Palestinian crackdown on militants. Israel insists on an end to all violence as a condition for Israeli steps.