Secretary of State Condoleezza Rice paid an emotional visit Wednesday to the church revered as marking the birthplace of Jesus, before hearing from prominent Palestinians that failure of her new peace initiative could worsen their conflict with Israel.

Rice, the daughter and granddaughter of Presbyterian ministers, traveled in her motorcade to the Church of the Nativity on Wednesday morning. "Being here, at the birthplace of my Lord and Savior, Jesus Christ, has been a very special and moving experience," Rice said after she lit a candle in the grotto of the stone church originally built during the time of Constantine.

To reach the church, Rice crossed through a section of the 456-mile security barrier Israel is building around and within the West Bank. The limitations of movement imposed by the barrier, and the area's dire economic conditions, came up during a subsequent meeting Rice held with Palestinian business and civic leaders, according to participants.

They said they told Rice of the high stakes of her endeavor. "Everyone agreed that if the process does not lead to concrete results, the region will go to a worse escalation of violence," said Maha Abu-Dayyeh Shamas, president of the Women's Center for Legal Aid and Counseling. "We can't afford another failure of the peace process."

Rice wrapped up four days of intensive diplomacy in the Middle East amid conflicting signs of how much progress she was making. At a Washington news conference, President Bush said he was encouraged by reports he was getting from Rice and alluded to Palestinian frustrations.

"The Palestinians that have been made promises all these years need to see there's a serious, focused effort to step up a state," Bush said. "And that's important so that the people who want to reject extremism have something to be for."

Yet after meeting Rice in Ramallah for a second time in three days, Palestinian Authority President Mahmoud Abbas complained that the Israelis were hindering progress toward writing a joint negotiating document that would help launch a U.S.-hosted peace conference later this fall. Israeli Foreign Minister Tzipi Livni declined to respond to the criticism after her own meeting with Rice, saying she was not going to play "the blame game."

Rice described the current negotiations as the most serious effort at settling the Israeli-Palestinian dispute in seven years. She also said that listening to Palestinian civic leaders' complaints was "sometimes sobering," but added that every one of the people present endorsed a two-state solution to the problem. She refused to be drawn into criticizing Israel over the barrier.

"Let's be real -- there is a security problem," Rice said. "No one wants to have barriers, but there is a security barrier there. We have been told many, many times -- and have been assured -- that it is not a political barrier and it cannot be a political barrier. I look forward to the day when security is brought about in a different way."

People present at the meeting that Rice held in Bethlehem with the Palestinian business and civic leaders said a focus of discussion was the struggling economy in the Palestinian territories and the need to provide some kind of hope, especially for young people.

Residents of Bethlehem are deeply frustrated by the economic devastation their small city has suffered since previous peace-making efforts collapsed and Palestinian violence surged. Tourism has declined precipitously. Even the landmark Jacir Palace Hotel, where Rice met with the civic leaders, is only 20 percent occupied. There are far fewer paying visitors, a hotel official said, than needed to break even.

Bethlehem residents require work permits to travel into Jerusalem. Samir Hazboun, the Chamber of Commerce president who was present at the Rice meeting, said that the number of area residents going to work in Israel has declined from 12,000 to 3,000.

Hazboun said the secretary was "listening very carefully" to the group but had made no promises. He made clear that the Palestinians are counting heavily on Rice and Bush. "The United States is responsible for the peace process," he said. "This is the most important request from us, that they have a successful conference."