On Tuesday, OImert held a first security discussion on the prisoner list handed to Israel as part of Egypt's efforts to assist in Shalit's release.
The discussion was attended by Defense Minister Amir Peretz, Shin Bet Chief Yuval Diskin, Mossad Chief Meir Dagan, and former Shin Bet Deputy Chief Ofer Dekel, who has been appointed by Olmert to oversee the return of Shalit and two other soldiers kidnapped by Hizbullah.
"During the discussion, disappointment was expressed over the list of prisoners Hamas wants to see released," a statement issued by the Prime Minister's Office said.
Israel will continue its talks with Egypt on the issue, but in the meantime it appears that there is no solution in the horizon.
"We would like to stress that although some progress has been made in the negotiations, a finalized deal is still far away, as we have been saying in recent days," the statement said.
"Different publications on this issue should be treated with caution, in order not to create false expectations. Our hearts are with the Shalit family members and we support them in their strong standing over the past few months and in the face of the recent publications, which definitely do not reduce their ongoing suffering."
'The ball is now in Israel's court'Following Tuesday's discussion, the list was expected to be returned to the Egyptian mediator, with notes and amendments. Simultaneously, Israeli ministers will hold discussions on the issue. After the list of Palestinian prisoners is finalized, the deal will be brought to the cabinet's approval.
Olmert is expected to discuss the Shalit affair with Palestinian President Mahmoud Abbas during their meeting next week. Palestinian sources said Tuesday that they were in close contact with Olmert's advisors in a bid to hold the meeting between the two leaders as soon as Sunday.
Apart from the kidnapped soldier issue, Abbas is expected to demand a discussion on expanding the ceasefire to the West Bank and to stress the need to solve the economic crisis in the Palestinian Authority and ease restrictions on the Palestinian population.
Hamas leader Moussa Abu Marzouk said on Tuesday that negotiations for Shalit's release are at a ''satisfactory stage'' but that the ''ball is now in Israel's court.''
Abu Marzouk also cast doubt on whether Olmert had the political strength to accept the deal. On Saturday Shalit's captors handed Egyptian mediators the names of hundreds of Israel-held Palestinian prisoners they want freed in a prisoner exchange.
Hamas and the Popular Resistance Committees have said that if Israel rejects the list of prisoners meant to be released – the entire deal may go up in flames.
Egyptian mediators have asked the Plaestinian organizations to refrain from making statements regarding the negotiations.
Ali Waked and AP contributed to this report