* French president to fly in, leading global truce push
* Hamas delegation to hold talks in Egypt
* UN recalls Mideast envoy for Gaza briefing
* Ground combat continues
* Palestinian death toll more than 500
By Nidal al-Mughrabi
GAZA, Jan 5 (Reuters) - Israeli forces on Monday pressed on with a deadly ground, sea and air offensive against Hamas militants in the Gaza Strip that has cut the territory in two and France spearheaded diplomatic efforts to obtain a truce.
A Hamas official said a delegation of the Islamist group would head for talks in Egypt, which has also launched contacts to achieve a ceasefire to end Israel's 10-day-old offensive.
Explosions from gunfire rocked Gaza overnight after Israeli soldiers moved into a northern zone and asked residents to leave their homes to avoid being hurt in the fighting. Some families sought refuge in nearby United Nations run schools.
Israel Radio said gun battles had erupted between Israeli and Hamas militants in the streets of Gaza City early on Monday.
U.N. Secretary-General Ban Ki-moon said he had recalled his special Mideast envoy for briefings, adding he was worried about the humanitarian situation in Gaza.
Israel launched its offensive with aerial bombardments on Dec. 27 to curtail Palestinian rocket attacks from Gaza ahead of an Israeli national election next month, then expanded it into a ground invasion on Saturday.
At least 512 Palestinians have been killed at least a quarter of them civilians, a U.N. agency said. A Palestinian human rights group put the figure at 40 percent.
Forty-two Palestinians were killed on Sunday, most of them civilians, as Israeli shells slammed into houses and Gaza's main shopping district, Palestinian medical sources said.
Four Israelis have been killed by rockets and mortars fired at Israel since the offensive began, and an Israeli soldier was killed in fighting on Sunday and 48 were wounded after Israel expanded its operation into a ground invasion.
Israel's advances into Gaza have carved the 40-kilometre long coastal territory into two separate zones, and forces have surrounded its largest urban area of Gaza City.
In Sunday's fighting, tanks poured shells and machinegun-fire into suspected militant positions and war planes struck as Hamas fighters fought back with mortars and rockets.
French President Nicolas Sarkozy was expected to arrive in the region on Monday in a fresh diplomatic push for a truce, which Israel has thus far resisted.
Hamas would also send representatives to Egypt for talks for the first time since the Israeli invasion began, Hamas official Ayman Taha said.
The United States, the region's powerbroker and Israel's closest ally, looked all but sidelined by the pending handover of the presidency, offering Europe a chance to take the lead and press for an end to the Israeli assault.
U.S. President-elect Barack Obama has been silent on the crisis, his advisers saying only President Bush would speak for Washington until Obama is sworn into office on Jan. 20.
The Bush administration has supported Israel, saying Hamas had to halt rocket fire at Israel for a truce to take shape.
Sarkozy, who meets Israeli leaders on Monday, has not let the end of France's European Union presidency last week prevent him from taking a vanguard role, but will share the work with a separate delegation led by the Czech foreign minister.
Before heading to Egypt for talks before meetings in Israel and the Palestinian territories, Sarkozy said he "condemned this offensive" for distancing chances for peace and making it harder to get aid to Palestinians in Gaza.
Aid groups have warned of a dire humanitarian situation in Gaza, where water, food and medical supplies were running short as people took shelter in their homes for days.
A foreign Red Crescent doctor said on Sunday: "Civilians are being killed ... shells are severing people's legs, shrapnel is going into people's bodies and into people's homes, a lot of people are being cut down. Everyone is terrified."
Israeli Prime Minister Ehud Olmert assured Sarkozy in a telephone call on Sunday that aid for the 1.5 million people trapped in the Gaza Strip would continue.
But Israel's president Shimon Peres made clear there would be no military let-up until Hamas stopped firing.
"We shall not accept the idea that Hamas will continue to fire and we shall declare a ceasefire. It does not make any sense," Peres, the largely titular head of state, said.
ISRAEL: FIGHTING FOR "MANY DAYS"
Israeli has said that the Gaza operation, though sparking waves of protests around the world, could last many days.
Government officials said Israel had set several goals, including weakening Hamas by killing its fighters and destroying its rocket arsenal and establishing deterrence so the group would think twice before firing cross-border salvoes.
In addition, the officials said, Israel hoped to win international backing for new security arrangements along the Egyptian-Gaza border to prevent Hamas from rearming through tunnels, which have been bombed in the current campaign.
Iranian-backed Hamas is estimated to have about 25,000 fighters. Israel has not disclosed how many troops are involved in the operation but thousands of reservists were on stand-by.
Hamas called off a six-month truce last month and stepped up its rocket attacks, citing Israeli raids and a continuing blockade of the enclave Israel quit in 2005.
International peace efforts aimed at creating an independent Palestinian state foundered after Hamas won elections in 2006 and drove Fatah forces loyal to Palestinian President Mahmoud Abbas from Gaza a year later.
Hamas has insisted it would not be subdued. "The Zionist enemy must know his battle in Gaza is a losing one," Abu Ubaida, a spokesman for Hamas's armed wing said on Sunday.
Ali Larijani, speaker for the parliament in Iran, a backer of Hamas, said "the Zionists should know that Gaza will become their graveyard."
Heavy civilian casualties in the territory packed with 1.5 million people could increase world pressure on Israel to halt its biggest military operation in Gaza in four decades.
The fighting also holds political risks for Israeli leaders ahead of next month's election, if its forces take heavy casualties in the ground fighting. Schools and malls have been shut for days in southern Israel, and streets were eerily empty. (Writing by Alastair Macdonald and Allyn Fisher-Ilan; Editing by Matthew Jones)