RAMALLAH, West Bank, Aug 4 (Reuters) - President Mahmoud Abbas' attempt to upgrade the Palestinians' status at the United Nations, despite U.S. and Israeli opposition, signals a bolder approach by a leader keen to forge a legacy after years of failed peace talks.

But Palestinians are divided on the merits of the diplomatic offensive. In the West Bank, Abbas' Fatah movement bills it as a turning point in the Palestinian struggle, while in Gaza, a politician from rival Islamist Hamas dismissed it as hot air.

Israel is wary. The Palestinians will likely emerge from September's General Assembly meeting with a U.N. status upgrade that will give them access to dozens of U.N. agencies. But talk in Israel of a looming "diplomatic tsunami" has subsided.

Abbas' Plan A -- to secure full U.N. membership for Palestine -- is destined to fail. The United States, which has veto power in the Security Council, is expected to oppose a move viewed in Washington as unhelpful to its Middle East diplomacy.

Plan B, as outlined by Palestinian officials, is to ask the General Assembly to upgrade Palestine to a non-member state from its current status as an observer. That would not need Security Council approval and elevate the Palestinians' U.N. status to that of the Vatican.

Some argue unless it is part of a deep rethink of Palestinian strategy, the upgrade will have little more than symbolic value and bring Palestinians no closer to independence in the West Bank, East Jerusalem and the Gaza Strip.

"It's a first step, but without further steps it is politically meaningless," said George Giacaman, a political scientist at Birzeit University in the West Bank.

"If the Palestinian Authority has a plan for after September, it hasn't announced it."

Born of paralysis in the peace process, the September move is being portrayed by Palestinian officials in the occupied West Bank as a step towards leveling the playing field in the struggle with Israel.

Though they have stated an intention to seek full U.N. membership, the Palestinians have yet to submit their application to U.N. Secretary General Ban Ki-moon, the first step in the process.

However, they are confident of success in the General Assembly thanks to support from states including Brazil and Argentina, among the most recent to recognize Palestine.

The move brings with it risks, particularly to the international aid upon which the Palestinian Authority depends. The U.S. Congress in July passed a resolution urging a suspension of aid to the Palestinians over the initiative.

"UNPLEASANT, BUT NOT TERRIBLE"

But it will produce some tangible results, giving the Palestinians access to U.N. agencies and potentially allowing them direct recourse to the International Criminal Court, where they could pursue cases against Israel.

"It's about opening new doors for the cause of Palestine," said Mohammad Shtayyeh, an official involved in the bid.

Israeli Prime Minister Benjamin Netanyahu does not seem overly concerned by that prospect. When discussing September, his aides say he invokes a catch phrase from an old Israeli television commercial: "Unpleasant, but not terrible."

Israel seems more wary about the potential for September to trigger Palestinian protests inspired by the Arab Spring.

The Palestinian leadership has called for mass protests in support of the bid under the slogan "Palestine 194", referring to their aim of becoming the 194th member of the United Nations.

But while calling for peaceful protests, the leadership has been criticised for doing little towards organising them.

"You can't get people out to demonstrate at the touch of a button," Fathi Barkawi, a Palestinian broadcaster, told participants during an official conference on ways to support the September initiative.

"Who said all the people have confidence in the leadership and will respond to them?" he added.

Reconciliation between Abbas' West Bank administration and Hamas in Gaza is seen as vital for mobilizing popular support behind the September initiative and, more broadly, any new Palestinian strategy.

The political impact of a status upgrade is in danger of being diminished by the split, which persists despite a deal earlier this year aimed at ending it.

The groups remain at odds over how to pursue their national cause. Hamas refuses to recognise Israel and advocates an armed strategy while Abbas opposes any form of violence and says negotiations are still his preferred path.

The Palestine Strategy Group, a think-tank, said in a new report international diplomacy such as the U.N. initiative can be just one part of a new Palestinian approach.

"The most important thing is Palestinian unity," said Hany al-Masri, an author of the document. (Additional reporting by Ali Sawafta in Ramallah and Dan Williams and Allyn Fisher-Ilan in Jerusalem; Editing by Sophie Hares)