GAZA, Oct 2 (Reuters) - Palestinian militants who seized an Israeli soldier in June warned Israel on Monday against trying to free him by force, and Egypt said Gilad Shalit's captors had rejected a deal to swap him for 1,000 Palestinian prisoners.
The militants, known as the Popular Resistance Committees, said stalled talks aimed at freeing Corporal Shalit had resumed but offered no details.
"If the Zionist enemy decided to enter Gaza in a large scale raid, the file of the soldier may get closed again," said Popular Resistance Committees spokesman Abu Mujahed.
"If they enter Gaza and kill people or even if they eliminate all Gazans, they will never regain their soldier."
Egypt said it had secured agreement with Israel for a prisoner swap but the militants had turned it down.
"Egypt succeeded in securing a swap deal with Israel to free (Palestinian) women, children, elders and those who have been serving long prison terms in exchange for the soldier," Egyptian Foreign Minister Ahmed Aboul Gheit told Dubai-based Al Arabiya television in an interview aired on Monday.
"A deal that could have guaranteed freeing 900-1,000 prisoners -- but sadly they have decided to keep holding him (Shalit)," said Aboul Gheit.
Egypt has been trying to broker a deal for the release of Shalit, who was seized in a cross-border raid from the southern Gaza Strip on June 25.
Israel responded by launching a ground offensive which has killed more than 220 Palestinians.
Abu Mujahed, whose group was one of three that took Shalit, said Egyptian-mediated talks on a swap had recently resumed.
"Contacts may have stopped at one stage but they have been resumed recently ... We have just demands. If these demands are not met, there will be no solution to this issue," he said.
A source close to the Shalit negotiations said: "Egyptian efforts and contacts with the factions are continuing".
Israel's top general, Dan Halutz, said on Sunday Israel could step up military action in the Gaza Strip to halt rocket fire at the Jewish state.
"We will have to find a military means to reduce the rocket fire on Sderot," Halutz told Israel Radio, naming the southern Israeli city frequently struck by rockets fired from Gaza.
Asked what more the army could do, Halutz replied: "For example a more continued and deeper ground action ... we are holding consultations about this."
Egyptian President Hosni Mubarak said last week Israel may release more Palestinian prisoners than expected as part of possible deal covering the release of Shalit.