By Nidal al-Mughrabi
GAZA (Reuters) - Israeli troops and tanks split the Gaza Strip and ringed its main city on Sunday in an offensive against Hamas that has killed more than 500 Palestinians, many of them civilians.
Israeli tanks poured shells and machinegun-fire into suspected militant positions and war planes as Hamas fighters fought back with mortars and rockets.
Hamas fighters kept up rocket salvoes against southern Israel, defying efforts by the Middle East's most powerful army to stamp out the threat Israel had set out to achieve.
European Union foreign policy chiefs launched a mission to seek a cease-fire in the Gaza Strip but acknowledged they faced a difficult task persuading the parties to stop fighting.
At least 42 Palestinians, most of them civilians, were killed on Sunday as Israeli shells slammed into houses and Gaza's main shopping district, medical sources said.
"We don't intend neither to occupy Gaza nor to crush Hamas, but to crush terror. And Hamas needs a real and serious lesson. They are now getting it," Israeli President Shimon Peres said in an interview on the ABC News program "This Week."
The Saturday night invasion of the Hamas-ruled Gaza Strip followed a week of Israeli bombardments from land, sea and air -- the most serious Israeli-Palestinian fighting in decades.
The Palestinian death toll tallied by Gaza medical officials in the nine days of "Operation Cast Lead" rose to 512. A U.N. agency said at least a quarter of the dead were civilians. A Palestinian human rights group put the figure at 40 percent.
One Israeli soldier was killed and 32 were wounded in the ground offensive, Israel said. Four Israelis have been killed by the Hamas rocket strikes since December 27.
Israeli officials said the offensive could last many days.
Calls for a cease-fire from the United States, Israel's main backer, other governments and the United Nations failed to gain traction over disagreements about who should stop firing first.
Israeli 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.
"The government did everything before deciding to launch the operation. This is an unavoidable operation," Israeli Prime Minister Ehud Olmert said.
TERRITORY CUT IN HALF
Witnesses said the Israeli thrust cut the territory in half from the border fence to the Mediterranean. Troops and armour had taken up positions around Gaza City itself.
Sunday morning saw gun battles between Hamas fighters and Israeli soldiers but later the action was mostly Israeli tank shelling and Hamas rocket and mortar-fire.
"The Zionist enemy must know his battle in Gaza is a losing one," Abu Ubaida, a spokesman for Hamas's armed wing, said.
An Israeli officer in Jerusalem said: "I would say that most of the resistances that we faced were from mortar shells and other things but not from serious Hamas fighters face-to-face."
The Israeli army said its aircraft struck dozens of targets, including smuggling tunnels, weapons caches and mortar squads. Dozens of Hamas fighters were hit, it added without being more specific.
Among the Palestinian casualties were five civilians killed and 40 wounded when tank shells slammed into Gaza City's main shopping area. Two children were dismembered by another blast from a tank, medical workers said.
A foreign Red Crescent doctor said: "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."
Heavy civilian casualties in the territory packed with 1.5 million people could increase international pressure on Israel to halt its biggest operation in Gaza in four decades.
But the fighting also holds political risks for Israeli leaders before a February 10 election, especially if its forces take heavy casualties in street fighting.
The Iranian-backed Hamas, which sees itself as the forefront of Palestinian resistance to Israel but is considered a terrorist group by Israel, the United Sates and the European Union, is estimated to have about 25,000 fighters.
They are believed to have laid landmines and booby traps to hinder the Israeli advance. Israel has not disclosed how many troops are involved in the operation but thousands of reservists were on stand-by.
In southern Israeli towns, residents hoped the offensive
The plight of Gaza residents was desperate. People have taken shelter in their homes for days and humanitarian agencies said water, food and medical supplies were running short.
The United States said a cease-fire should take place as soon as possible but must guarantee an end to Hamas rocket strikes.
Former British Prime Minister Tony Blair, envoy for powers sponsoring Middle East peace talks, was to meet Israeli Defence Minister Ehud Barak on Sunday. French President Nicolas Sarkozy is due in Jerusalem on Monday.
Hamas called off a six-month truce last month and stepped up its rocket attacks, complaining at 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.
(Writing by Angus MacSwan; Editing by Sami Aboudi)