JERUSALEM: Israel hoped that by pulling its settlers and troops from Gaza in 2005, it would also leave behind responsibility for the Gazans. With the help of the West and more moderate Arab countries, the Palestinian Authority could begin to create a prosperous state, the new Palestine, as if the continuing Israeli occupation of the West Bank were somehow irrelevant.

It was another case of wishful thinking. As rockets continue to fall on Israeli towns, and Israeli politicians call for harsh retaliation, Israel faces an acute quandary in Gaza, with delicate political, military and moral dilemmas. Israel is trying to contain a new form of polity: a non-sovereign, semi-occupied, semi-state controlled by Hamas, considered a terrorist group by the United States and the European Union and officially committed to the destruction of the very country obligated to provide it with fuel, electricity, water and food.

Israeli politicians, under pressure from the public, are demanding harsh retaliation, the assassination of Hamas leaders and a major military incursion to end the rocket fire. Defense Minister Ehud Barak and Prime Minister Ehud Olmert had been preaching patience.

But now, with the Winograd report on the failures of Olmert's war against Hezbollah safely behind him, there is evidence of a government "information campaign" to try to justify a major military operation. Israeli officials argue that the rockets are bad enough, but that Hamas is becoming Hezbollah, a sophisticated military organization threatening regional stability.

Since June, when Hamas forces routed Fatah in Gaza, "this is Hamastan," said a close Olmert ally, Haim Ramon. "This is not a terrorist group hiding in a state. They are the state, and they are a terrorist organization that refuses to recognize Israel's right to exist." But of course Gaza is not a state, but part of an occupied Palestinian entity, which is Israel's problem.

Ramon, a former Labor Party member, supports peace talks with the Palestinian president, Mahmoud Abbas, and a simultaneous "war against Hamastan," and he, too, is talking tough. "No society in the world provides fuel and electricity to a country rocketing it," he said, but Israeli cuts in supplies to Gaza have already brought fierce criticism about "collective punishment" of civilians and even cautions from Washington.

Ramon would go further: Israel should, after warning civilians to leave, "immediately attack" the areas from which the rockets are launched.

Foreign Minister Tzipi Livni took diplomats to the Gaza border on Wednesday and warned them that "the situation in the region is unbearable, and the threat of terror from Gaza is growing larger from year to year." She said that the problem was not simply the rockets, "but also the strengthening of the terror organizations," aided by the Hamas breakout into Egypt last month. "Israel," she said, "must act to reduce these threats."

Fine, but how exactly? Shlomo Brom, a retired general at the Institute for National Security Studies, says that none of the military options is especially attractive. To stop rockets, as the army learned in Lebanon, Israel must occupy the launching zones.

But the range of the rockets is improving.

"That means, for all practical purposes, occupying most of the Gaza Strip," he said, "and no one in Israel other than the fringe right has the appetite to reoccupy the Gaza Strip." Hamas has weapons and built fortifications, "and there are thousands of terrorists willing to fight you." The Israeli forces would win easily, Brom said, "but it takes a long time, and for what? To regain rule over 1.5 million Palestinians? What's the exit strategy?"

Such an operation could also make it impossible for Abbas to continue peace talks with Israel, no matter how much he would like to see Hamas weakened or removed from power.

Other military options include an intensification of current operations against Hamas, but that would not stop the rockets. Ground operations with limited goals - making sure Ashkelon is out of range, for example - could mean retaking northern Gaza and a wide swath next to Gaza's border with Egypt, to diminish the smuggling.

More effective would be the kind of retaliation world opinion is no longer likely to accept, Brom said, "doing to them what they do to us," launching effectively untargeted rockets at Gaza City or the Jabaliya refugee camp in return for every one fired at Sderot. Killing Hamas leaders can deter but have unexpected consequences, like a new campaign of suicide bombings.

Amos Oz, the most famous writer in Israel, warned the other day: "Israel must not fall into the trap that Hamas is laying for us and march into Gaza," adding: "The occupying force will not have a single quiet day. Nor will Sderot."

There is another option, Oz noted, which would be to negotiate the cease-fire with Hamas that its leaders have been proposing.

Diplomats say that Egypt, stung by the border crisis, is working on an ambitious Israeli-Hamas package plan - an exchange of prisoners, including Corporal Gilad Shalit and possibly the jailed Fatah leader Marwan Barghouti; a long-term cease-fire in Gaza; and a reopening of the Egyptian-Gaza border under the eyes of Abbas's presidential guard.

Israel is likely to be cautious. To do a deal with Hamas would further undermine Abbas, when Israel and Western policy is to weaken Hamas and strengthen Abbas.

To arrange a long-term cease-fire might bring quiet to Sderot, but it would allow Hamas to regroup, rearm, continue to improve its military capacities and strengthen its political and security hold over Gaza.

Still, as Bernard Avishai, author of "The Hebrew Republic," points out, Israel has a long-term cease-fire with Hezbollah, just as rejectionist as Hamas, coupled with a disengagement of forces. "You have to stop the cycle of violence," he said. "Israel can't win a war in Gaza, but it can't lose a Gazan peace."

A former national security adviser, Giora Eiland, wants to use the threat of harsh military and economic sanctions not to defeat Hamas, but convince it to stop the rocket fire - or else.

Eiland proposes a deal: cease-fire, prisoner exchange, normal fuel and electricity supplies, a reopened, monitored Egyptian border. If Hamas refuses, however, he proposes a very hard stick: the bombing of Gaza's ministries, police stations and infrastructure; a halt in the supply of goods, fuel and electricity; and the economic separation of Gaza from the West Bank.

Elegant, perhaps, but unlikely, given the international outcry that would follow. A better answer, of course, would be a rapid peace treaty creating a Palestinian state, supported by the Arab League and isolating Hamas, with international troops helping to patrol the borders. But since both Israel and Hamas have little interest in a final settlement now, that seems like more wishful thinking.