Israeli and moderate Palestinian leaders were last night struggling to agree a joint declaration intended to be the centrepiece of the international United States-convened Middle East summit less than a week away.

Palestinian and Israeli negotiators reconvened in the wake of two and half hours of direct talks between the Israeli Prime Minister, Ehud Olmert, and the Palestinian President, Mahmoud Abbas, to overcome differences still clouding the planned summit, intended to kick-start the first resumption of a peace process in seven years.

Miri Eisin, Mr Olmert's spokesperson, said there had been "progress" at the talks but officials on both sides acknowledged the possibility that the summit scheduled for next week in Annapolis, Maryland, could go ahead without a joint declaration designed to define common ground between the two sides. One possibility, if a joint declaration cannot be agreed, is said to be two separate declarations by Mr Olmert and Mr Abbas – or even for the parameters of future negotiations to be left to the speech President George Bush makes to the conference.

The fresh efforts came as the Israeli cabinet approved the release of 441 prisoners – mainly in Mr Abbas's Fatah movement – and pledged not to build additional Jewish settlements in the West Bank as well as repeating earlier promises to remove illegal settlement outposts.

The prisoner releases fall short of the 2,000 demanded by the Palestinian negotiators who swiftly also complained that the pledge fell well short of the stipulation in the internationally agreed road map for peace for a total freeze, including in "natural growth" of existing settlements. "Either it's a 100 per cent settlement freeze or no settlement freeze" said the lead negotiator, Saeb Erekat. "There is nothing in the middle."

Earlier, the latest demand by the Israeli government of the Palestinians – that they explicitly recognise Israel as a "Jewish state" – drew unexpected fire from Dov Weissglass, the man who was the closest and most powerful lieutenant to the former prime minister Ariel Sharon, until Mr Sharon's debilitating stroke nearly two years ago.

The current negotiations were "filled with real problems and actual obstacles, and there is no need to create unnecessary difficulties," Mr Weissglass wrote in the mass circulation Yedhiot Ahronot. Mr Weissglass said the demand, which has already been publicly rejected by the Western-backed Palestinian Prime Minister, Salam Fayyad, was unnecessary because "the Palestinian Authority has already recognised the state of Israel as a Jewish state since there is no other Israel." He added: "There is no need for double recognition."

Addressing the main issue – Israel's insistence that the families of Palestinian refugees who fled or were driven from their homes in 1948 should not return to Israel – Mr Weissglass said that the US's description of Israel as a "Jewish state" had been to make clear it accepted that there would be no such return, a position he endorses. Mr Olmert, who told the French Foreign Minister, Bernard Kouchner, at the weekend that the Annapolis event itself would be an achievement, faces open threats from right-wing parties in his coalition to withdraw their support if he makes substantive concessions.

He nevertheless told his cabinet yesterday: "The negotiations will start after Annapolis and it will be very intensive, very serious. It will deal with all the core issues that are a part of the process that has to lead to two nation states for two nations." Mr Olmert is due to meet President Mubarak of Egypt today in Sharm El Sheikh in an effort to secure support from Arab countries, including Saudi Arabia, at the summit.

But Yossi Beilin, a passionate peace campaigner and leader of the left-wing Meretz Party, wrote in Ha'aretz yesterday that in the now-likely absence of real discussion at Annapolis on the "core issues ... Mr Olmert would be better off ... remaining at home".