JERUSALEM – Yesterday Israel approved the release of 441 Palestinian prisoners and pledged not to build any new settlements in the West Bank, but it stopped short of American demands to halt construction in existing settlements before a crucial U.S.-hosted Mideast conference.

Israel announced the moves ahead of a meeting between Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas. The two men were trying to break a deadlock in preparations for the summit, expected to take place next week in Annapolis, Md.

Israel sees the conference primarily as a ceremonial launching pad for new peace efforts, while the Palestinians want a more detailed plan for how post-conference talks will proceed.

Olmert’s spokeswoman, Miri Eisin, said progress was made during the two-and-a-half hour meeting. She did not elaborate, but said negotiators would meet later to continue their work.

Seeking to drum up support for the conference, Olmert is heading to Egypt on today for talks with President Hosni Mubarak, his office said. Arab League members are to decide on Friday whether they will join the gathering. High-level Arab attendance is seen as crucial to its success.

With the outcome of Annapolis uncertain, Israel has been under American pressure to take steps to bolster Abbas, including a settlement freeze and a large-scale release of Palestinian prisoners.

A settlement freeze, and a related promise yesterday to dismantle tiny settlement outposts, are key Israeli commitments under the “road map,” a U.S.-backed peace plan that stalled shortly after its inception in 2003. The Palestinians, for their part, were supposed to crack down on militants.

The U.S. has been trying to revive the road map ahead of the peace conference.

At a Cabinet meeting, Olmert said Israel would not build any more settlements in the West Bank.

“Let’s be straight, we committed ourselves in the road map not to build new settlements and we will not build any,” Olmert was quoted as saying by Eisin.

But he indicated there would be no end to construction in existing settlements, as required by the road map.

“We won’t choke off under any circumstances the existing settlements,” Olmert said, according to another meeting participant, who spoke on condition of anonymity under Israeli civil service guidelines.

Israel has built no new authorized settlements in nearly a decade. But it has continued to rapidly expand existing settlements to accommodate what it calls “natural growth.”

Some 270,000 Israelis live in dozens of West Bank settlements, in addition to about 180,000 Israelis living in east Jerusalem. The Palestinians claim both areas for their future state.

In Washington, the State Department welcomed the Israeli moves.

“These would be important steps in advance of the Annapolis conference, important confidence-building measure steps,” spokesman Sean McCormack told reporters.

But the Palestinians reacted coolly to Olmert’s announcement.

“Either it’s a 100 percent settlement freeze or no settlement freeze. There is nothing in the middle,” said Palestinian negotiator Saeb Erekat.

The Cabinet overwhelmingly approved Olmert’s proposal to release 441 prisoners. Although the release would be the largest in years, it fell short of Palestinian calls to free some 2,000 prisoners. Israel holds an estimated 9,000 Palestinian prisoners.

“We welcome the release of any prisoners,” said Palestinian Foreign Minister Riad Malki. “But this is not enough. We will continue demanding the release of all prisoners.”

Olmert and Abbas have been meeting frequently to lay the groundwork for the U.S. conference.

“We need to hear from him (Olmert) things that will satisfy us, so we can go to Annapolis on a solid basis,” Abbas told reporters shortly before his meeting with Olmert in Jerusalem.

The two men smiled and warmly embraced each other at the beginning of their meeting at Olmert’s official residence. Negotiators also smiled and made small talk, and Abbas paused to sign the residence’s guest book.

Eisin, the Israeli spokeswoman, said talks focused on carrying out the road map, as well as efforts to form a joint blueprint for peace, which they hope to present to the conference next week.

“There was progress,” she said, adding that negotiating teams planned to continue work later today. However, Israeli officials said significant gaps remained and there was a possibility there won’t be a joint statement at Annapolis.

The Palestinians want the document to address issues at the heart of the conflict with Israel, such as the borders of a future Palestinian state, shared sovereignty over disputed Jerusalem and the fate of Palestinian refugees.

Israel says the summit should be a forum to formally renew peace talks, which broke down in violence seven years ago, with discussions on core issues to follow.

The U.S. also hopes the gathering will give an international boost to Abbas in his power struggle against the Hamas militant group, which now controls the Gaza Strip.

“The negotiations will start after Annapolis and it will be very intensive, very serious,” Olmert told his Cabinet. “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.”

Amid the disagreements, the U.S. has not announced an official date or invitation list for the summit.

In a boost for peace efforts, international Mideast envoy Tony Blair, Israel and the Palestinians announced a number of economic projects that could create tens of thousands of jobs for Palestinians.

Among the projects are a Turkish-sponsored industrial park in the southern West Bank, a sewage project in northern Gaza and road construction in the West Bank.

Standing alongside Blair, Israeli Defense Minister Ehud Barak said Israel planned to remove 24 roadblocks and one checkpoint in the West Bank in the coming days.

The U.N. and Palestinians say Israel’s hundreds of West Bank roadblocks have severely hurt the Palestinian economy.

Israel says the travel restrictions are necessary to prevent attacks. Barak said it would take a year or two for Israel to remove all checkpoints.