* Air strikes, rocket attacks persist
* Palestinian delegates threaten to walk out of Cairo talks
* Hamas sees slim chances of success
By Nidal al-Mughrabi and Allyn Fisher-Ilan
GAZA/JERUSALEM, Aug 10 (Reuters) - An Israeli air strike killed a Palestinian man and wounded seven others on Sunday, medics said, in a third day of renewed fighting that has jeopardized international efforts to achieve a lasting ceasefire in a more than month-old Gaza conflict.
The parties remained far apart. Israel refused to send back officials to Egyptian-brokered peace negotiations in Cairo as long as violence along the Israel-Gaza border went on. The head Palestinian delegate on Saturday threatened to quit the talks unless Israel reversed that stance.
Hamas spokesman Sami Abu Zuhri said he saw "very slim" chances of success in efforts to renew a three-day truce that stopped the fighting last Tuesday, only to see the tensions pick up again on Friday.
Prime Minister Benjamin Netanyahu's cabinet would likely address the crisis in its weekly session later on Sunday.
"We are at a crossroads and within two or three days we will see whether we are heading left toward an agreement, or right, toward escalation," Intelligence Minister Yuval Steinitz, a close ally of Netanyahu, told Channel 10 television on Saturday.
An Israeli air strike in Jebalya refugee camp before dawn caused the latest casualties in Gaza, killing a man and wounding seven, raising the Palestinian death toll to 1,891 since the July 8 launch of Israel's offensive to quell rocket fire.
Gaza officials said most of the Palestinians killed were civilians. Israel said 64 of its soldiers and three civilians have died in the fighting that started on July 8 following a surge in Palestinian rocket salvoes into Israel.
Israel expanded its air and naval bombardment into a ground offensive on July 17, and pulled its infantry and armour out of the enclave on Tuesday after saying it had destroyed more than 30 infiltration tunnels dug by militants.
Heavy civilian casualties and destruction during Israel's campaign in packed residential areas of the Gaza Strip have raised international alarm over the past month.
In renewed fighting since the end of a three-day truce on Friday, Israel has killed 14 Palestinians in air strikes. Militants have fired more than 100 rockets at Israel, causing no damage or casualties.
TWO MORE GAZA CHILDEN KILLED
Medical officials in Gaza said a 10-year-old boy and 13-year-old girl were among nine killed on Saturday. Two other Palestinians were killed when their motorcycle was bombed, and the bodies of three others were found beneath the rubble of one of three bombed mosques.
Two more Palestinians were killed in an air strike on a car in the southern town of Rafah, Gaza medics said.
Israeli air strikes killed five Palestinians on Friday, among them a 10-year-old boy near a mosque in Gaza City. Two Israelis were hurt by a mortar attack on Friday.
The violence has grown less intense than at the war's outset, down from more than 100 rocket firings a day including at major cities like Tel Aviv which have not come under attack since Israel withdrew ground troops from Gaza on Tuesday.
But Egypt, backed by American and European mediators, has made no visible progress towards restoring that ceasefire since it expired on Friday.
There was no sign of diplomatic progress in Egypt on Saturday. The head of the Palestinian delegation, Azzam Ahmed said "we will leave Cairo tomorrow if it is confirmed to us they (Israelis) will not return" unconditionally.
Egypt is meeting separately with each party. Israel and Hamas deny each other's legitimacy, with Hamas rejecting Israel's right to exist and Israel rejecting Hamas as a terrorist organisation.
Gaza militants appeared to be trying to ramp up pressure to end a blockade of the coastal Gaza territory both Israel and Egypt have imposed.
A sticking point was Israel's demand for guarantees that Hamas would not use any reconstruction supplies sent to Gaza to construct more tunnels of the sort that Palestinian fighters have used to infiltrate Israel.
Israel has also resisted easing access to Gaza, suspecting Hamas could restock with weapons from abroad.
Ahead of the truce's expiration on Friday, Israel said it was ready to agree to an extension. Hamas did not agree.
Abu Zuhri said Israel had rejected most of the group's demands. The Palestinians want Israel to agree in principle to lift the blockade, release prisoners and permit the opening of a sea port.
"There is no going back and the resistance will continue ... there is no retreat from any of our demands," Abu Zuhri said.
(Additional reporting by Lin Noueihed in Cairo; Writing by Allyn Fisher-Ilan; Editing by David Gregorio)