Israeli forces surround West Bank city

An Israeli soldier north of the West Bank town of Jenin

JERUSALEM (CNN) -- Israel Defense Forces Tuesday sat on the outskirts of the northern West Bank town of Jenin, taking up positions in Palestinian-controlled territory, Israeli security sources said.

The IDF force was made up primarily of engineering corps, consisting of about 20 tanks, bulldozers and troops. The operation effectively surrounded the town.

The latest development came as Israeli and Palestinian leaders haggled over where to hold a proposed meeting between Israeli Foreign Minister Shimon Peres and Palestinian leader Yasser Arafat.

Security sources called Jenin a "nest of terrorists," saying the town was the springboard for a number of attacks into Israeli territory, including a suicide attack Sunday.

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IDF said the deployment could last several days.

Several exchanges of arms fire followed between Israeli forces and Palestinian gunmen. Palestinian sources reported three people seriously hurt.

The IDF action came after a weekend of violence in which at least seven people died and the deaths early Tuesday of two Israeli border policemen in a battle with Palestinian gunmen near Kibbutz Magal in northern Israel.

There was also a firefight overnight in the divided West Bank town of Hebron. The Palestine Red Crescent Society said three Palestinians were hurt, including two who are in serious condition.

A proposal for truce talks Tuesday between Arafat and Peres hit a snag over location, the latest issue dividing the two sides.

Chief Palestinian negotiator Saeb Erakat said Monday the Palestinians had proposed meeting in Cairo. Taba in northern Egypt was suggested as another possible site by the Palestinians, but Israel balked at both.

Israel Radio reported that Israeli Prime Minister Ariel Sharon had rejected a call for Arafat to meet with Peres at Taba, Egypt, Monday.

The Israelis have proposed Erez Crossing on the Israel-Gaza border as the site, but the Palestinians, in turn, objected to that location because of security concerns.

On Sunday, at least five Israelis were killed in a shooting incident and two bombings, including the first suicide bombing suspected of having been carried out by an Israeli Arab.