Q&A: What's next in the Gaza conflict?

(Reuters) - Israeli ground forces battled Palestinian gunmen in the Gaza Strip on Sunday, stepping up an eight-day-old offensive against Hamas militants firing rockets into the Jewish state. The Palestinian death toll topped 500, including many civilians. Gazan rocket attacks have killed four Israelis.

Here are some questions and answers about the conflict:

Q - Where do things stand now?

A - Israeli tanks and troops have taken up position around Gaza City, the largest population center in the territory of 1.5 million Palestinians, as well as in northeastern frontier zones used by gunmen to launch rockets. Israel has also bisected the Gaza Strip by blocking a central highway and shelling a coastal road from the sea. Israel says one soldier has been killed and 31 wounded by Palestinian gunfire, mortar bombs, or mines.

Israel's objective, according to a senior military official, is to stop rocket launches from the areas of operation and "hit the Hamas infrastructure" -- parlance for killing or capturing the faction's fighters and destroying their facilities. Israeli analysts also say the scale of the devastation in Gaza is designed to stir popular Palestinian rancour against Hamas, to the point where the Islamists are forced to sue for a truce.

Another goal has been to destroy a network of tunnels to Gaza from neighboring Egypt, which allowed Palestinians in the enclave to smuggle in weapons and commercial goods, circumventing an Israeli-led blockade.

Israel's offensive included several air force sorties in which "bunker buster" bombs were dropped on the Gaza-Egypt frontier, exploding underground to collapse the secret passages.

Though Israeli officials have spoken of the need to prevent a resumption of tunnel smuggling, this appears to be a matter for diplomacy rather than the military. Cairo could be angered by any Israeli insertion of troops in the Egypt-Gaza frontier.

Q - How long will the operation last?

A - The army said the sweep would last "many long days" and that troops were prepared to push as deep into Gaza as required by the Israeli government as it seeks a diplomatic solution. Pressure on Israel to cease fire is likely to grow as casualties mount. Some international leaders have already called for a truce and anti-Israel protests have erupted across the Middle East and Europe in response to the death of civilians in the Gaza Strip. In Israel, strong public support for the operation could erode if large numbers of soldiers are killed and rocket fire intensifies. Israel holds a national election on February 10.

Q - What's life like in Gaza?

A - Emergency services have been stretched to the limit by the carnage from Israeli barrages and ever-encroaching clashes. There is food, but not enough, and frequent power outages. There is no shortage of water. Hospitals do not have enough beds or medicine to cope with the wounded, though Israel says it is allowing through sufficient humanitarian supplies. Palestinians cannot leave Gaza unless they risk a perilous trip through some smuggling tunnel to Egypt.

Q - How might Hamas fight the Israeli ground forces?

A - Gaza is one of the most densely populated places on earth and Israel faces tough urban warfare in a showdown with Hamas forces who know their way around the maze of streets and back roads. That might explain why the Israelis have yet to enter Gaza City. While Hamas says its forces have already inflicted significant Israeli casualties in face-to-face fighting, the military says most Palestinian attacks on its troops have been from afar. Hamas is believed to command at least 25,000 trained fighters with a variety of small-arms and anti-armor missiles. Israel does not detail its deployments but Defense Minister Ehud Barak has said in the past that two or three army divisions -- more than 20,000 troops -- would be needed for a Gaza sweep.

Hamas said it captured two soldiers during Sunday's fighting. Israel denied it. Hamas may be waging psychological warfare in parallel to open combat, mindful of Israelis' emotional attachment to their conscript army.

Q - What has happened to Hamas's leaders?

A - Several military and political leaders have been killed in Israeli air strikes, but most of the Hamas upper echelon went to ground early in the offensive. Hamas says its command network remains intact and that its leaders do not fear "martyrdom."

Q - What about Gilad Shalit, the Israeli soldier held captive by Hamas since June 2006?

A - Israel, which long balked at Hamas demands that it free hundreds of jailed Palestinian militants in exchange for Shalit, says the current offensive may pressure Hamas into agreeing to a less lopsided swap. The presence of so many Israeli troops in Gaza also raises the possibility of a rescue attempt. But Hamas says Shalit is being kept away from Israel's reach and that the fighting can only hurt his chances of going home unharmed.

Q - Is a truce still possible?

A - The United Nations, United States, European Union, Arab League, Russia and Turkey all urge a ceasefire. Washington has insisted that Hamas must stop firing rockets first. EU foreign ministers were due to start a peace mission on Monday and French President Nicolas Sarkozy was scheduled to go to Jerusalem.

Israel rejected earlier calls for an immediate ceasefire, but its leaders are divided on what course to take following the ground offensive. Some say a formal ceasefire backed by the U.N and major powers would be best. Others say it would only tie Israel's hands should rocket fire continue. They believe the best course is to cease fire unilaterally but only when Israel is convinced that Hamas has got the message: start up again, and we will hit you again.

(Writing by Dan Williams and Nidal al-Mughrabi, Editing by Samia Nakhoul)