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Six Palestinians, including an eight-year-old boy, were today killed in the largest Israeli raid on the Rafah refugee camp for six months.

Armoured vehicles and attack helicopters swept into the camp, which is on Gaza's border with Egypt, in an attempted to search out alleged weapons-smuggling tunnels.

The Israelis positioned snipers on rooftops and fired a tank shell at an electricity transformer, plunging the camp into darkness.

Gun battles erupted between Israeli soldiers and Palestinian gunmen, continuing well into today.

Most of the casualties were caused when a helicopter fired a missile at a crowd, witnesses said. The Israeli military said that the missile had targeted a group of gunmen.

One of the dead was decapitated, and an Israeli soldier was also lightly wounded in the fighting.

Dr Ali Mousa, director of Rafah's small Najar hospital, said that women and children were among the wounded. Two of the dead were identified as members of militant groups, and at least two others were civilians.

Dr Mousa said that his hospital was overwhelmed by the large numbers of casualties. Many of the wounded required surgery, but he had only one operating room and not enough medicine.

Usually, serious cases are sent to hospitals in other towns, but those patients could not be transferred because of Israeli travel restrictions.

Israeli military officials, speaking on condition of anonymity, said Israel had intelligence warnings that Palestinians were planning to use the tunnels to smuggle in anti-aircraft missiles - weapons that could have a strategic impact on the three-year long conflict.

They said that Palestinians were trying to obtain shoulder-held Stinger missiles that could shoot down the attack helicopters often used by Israel in Gaza. The missiles could also threaten Israeli warplanes or civilian aircraft flying close to the coastal strip.

Also, the officials said, the Palestinians were trying to smuggle Katyusha rockets, which would have the range to hit Israeli cities near Gaza.

During the conflict, the Palestinians have been aiming homemade mortars and rockets at Israeli towns and settlements.

The officials did not present evidence to back up the claims, but said that Egypt was not taking steps to stop the smuggling.

Palestinian cabinet minister Saeb Erekat condemned the Gaza raid, saying that such action is contributing to the instability undermining efforts to get a new Palestinian government in place.

In the West Bank, the survival of Palestinian prime minister Ahmed Qureia's proposed cabinet was in question after the legislature yesterday put off a vote of approval amid intense political wrangling.

An exasperated Mr Qureia told Yasser Arafat that he no longer wants the job, but stopped short of formally resigning.

Mr Erekat said: "We don't look good. At a time when the Palestinian people are suffering, the last thing we need is an internal crisis."

Mr Qureia's success is key to efforts to salvage the stalled US-backed road map peace plan, which outlines a path to ending three years of conflict and establishing a Palestinian state by 2005.

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