FACTBOX: Factors to watch for over West Bank settlements

(Reuters) - Israeli Defense Minister Ehud Barak authorized on Monday construction of 455 settler homes in an apparent bid to mollify settlers and their cabinet supporters before a possible limited construction freeze.

Here is the state of play on the issue of Israeli settlement in the occupied West Bank, a key factor affecting the resumption of Israeli-Palestinian peace talks:

U.S. President Barack Obama, who has demanded a settlement freeze, is set on getting Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas to meet and negotiate a peace deal leading to Palestinian statehood.

The three could meet at the U.N. General Assembly, around September 23. While that would mark the first talks between Abbas and Netanyahu since the right-wing Israeli leader took office in March, many diplomats are cautious and speak of October for a formal return to negotiation. If Obama and Netanyahu compromise on settlements, Abbas -- who has conditioned talks on a freeze -- will find it hard to shun talks.

Netanyahu, whose coalition has a strong pro-settler wing, wants to maintain "natural growth" in settlements Israel aims to annex in any final deal. Despite the new building permits, watch for a U.S.-Israel compromise on a freeze from six to 24 months -- with exemptions for ongoing projects.

Obama's Middle East envoy, George Mitchell, is due back in the region later this week to try to finalize a deal that could include goodwill gestures from Arab states to Israel. Initial steps toward normalizing relations with Israel could help Netanyahu sell a partial construction moratorium in settlements to his power base in the right-wing Likud party.

If peace talks resume, the outlines of a possible accord remain those of a decade ago, as do the elements of discord. The rift between Abbas's Fatah movement and Gaza's Hamas Islamists, shunned by Israel and the West, is a further obstacle. Talk of Obama setting a goal of a deal in two years has been met with skepticism.

Netanyahu wants Palestinians to accept Israel as a Jewish state. Abbas rejects that. Obama is unlikely to let a row over that issue prevent at least a start to negotiations.

Abbas also wants Israel to commit to negotiating a final deal on core issues, not interim agreement .

Watch, too, for Obama facing opposition in Congress to added pressure on Israel. Mid-term elections are in November 2010.

(Writing by Jeffrey Heller and Alastair Macdonald; Editing by Janet Lawrence)