* Foreign airlines cancel Israel flights over rocket risk
* Gaza death toll hits 645, mostly civilians
* UN rights chief warns of possible war crimes
* Diplomatic efforts pursued on many fronts (Adds UN saying Israel may be committing war crimes)
By Nidal al-Mughrabi and Crispian Balmer
GAZA/JERUSALEM, July 23 (Reuters) - Israeli forces pounded Gaza on Wednesday, meeting stiff resistance from Hamas Islamists and sending thousands of residents fleeing, as U.S. Secretary of State John Kerry said on a visit to Israel ceasefire talks had made some progress.
In a blow to Israel's economy and a public relations coup for Hamas, U.S. and European air carriers halted flights to the Jewish state citing concern over a militant rocket from Gaza that hit a house near Ben Gurion airport. Israel urged a re-think, saying its air space was safe.
Adding to pressure on Israel, U.N. High Commissioner for Human Rights Navi Pillay said on Wednesday there was "a strong possibility" that it was committing war crimes in Gaza, where 645 Palestinians have died in the fighting, mostly civilians.
Israel denied the suggestion, stepping up the war of words and accusing Hamas of using fellow Gazans as human shields.
Making an unannounced, one-day visit, Kerry was due to see Israeli Prime Minister Benjamin Netanyahu, Palestinian President Mahmoud Abbas and U.N. Secretary General Ban Ki-moon, signalling an intensification of efforts to end the bloodshed.
"We have certainly made some steps forward. There is still work to be done," Kerry said shortly after arriving.
Israel launched its offensive on July 8 to halt missile salvoes by Hamas and its allies, struggling under the weight of an Israeli-Egyptian economic blockade and angered by a crackdown on their supporters in the nearby occupied West Bank.
After failing to halt the militant barrage through days of aerial bombardment, Israel sent ground troops into the Gaza Strip last Thursday, looking to knock out Hamas's missile stores and destroy a vast, underground network of tunnels.
"We are meeting resistance around the tunnels ... they are constantly trying to attack us around and in the tunnels. That is the trend," Israeli military spokesman Lieutenant-Colonel Peter Lerner said on Wednesday.
Some 29 Israeli soldiers have been killed so far in the conflagration, including a tank officer shot by a Palestinian sniper overnight. Three civilians have died in rocket attacks out of Gaza, including a foreign labourer hit on Wednesday.
The military says one of its soldiers is also missing and believes he might be dead. Hamas says it has captured him, but has not released a picture of him in their hands.
Already hurt by mass tourist cancellations, Israel faced increased economic pressure after the U.S. Federal Aviation Administration (FAA) took the rare step on Tuesday of banning flights to Tel Aviv for at least 24 hours.
Many other international airlines, on heightened alert after a Malaysian airliner was shot down over an area of fighting in Ukraine last week, followed suit, while Israel's own carriers continued to operate.
The FAA action represented a public relations coup for Hamas, which is anxious to dent Israel's global image. However, the Tel Aviv stock exchange and Shekel were flat, with traders showing little immediate concern about the flight stoppages.
An Israeli official said Netanyahu had asked Kerry to help restore the U.S. flights. A U.S. official said the Obama administration would not "overrule the FAA" on a security precaution but noted the ban would be reviewed after 24 hours.
Clouds of black smoke hung over Gaza, some 65-km (40 miles) south of Ben Gurion, with the regular thud of artillery and tank shells filling the air.
Palestinian medics said two worshippers were killed and 30 wounded in an attack on a mosque in the heart of the densely populated Zeitoun neighbourhood in eastern Gaza City.
In a move that could effectively turn Abbas into the main Palestinian point person for any Gaza truce, his umbrella Palestine Liberation Organization (PLO) on Wednesday formally supported core conditions set by the Hamas-led fighters.
These demands include the release of hundreds of Hamas supporters recently arrested in the nearby West Bank and an end to the Egyptian-Israeli blockade of Gaza, which has stymied the economy and made it near impossible for anyone to travel abroad.
Egypt has tried to get both sides to hold fire and then negotiate terms for protracted calm in Gaza, which has been rocked by regular bouts of violence since Israel unilaterally pulled out of the territory in 2005.
Hamas, which refuses to recognise Israel's right to exist, baulked at Cairo's original, barebones offer. The dispute was further complicated by distrust between Egypt under President Abdel Fattah al-Sisi and Hamas.
Egyptian sources said a unified Palestinian position could help achieve a deal. Unlike Hamas, Abbas and his Western-backed PLO have pursued peacemaking with Israel for two decades.
Gaza's Health Ministry said 18 Palestinians were killed on Wednesday, many of them in the southern town of Khan Younis -- one of the focal points of Israel's recent assault.
In the far north, residents continued to flee Beit Hanoun as Israeli tanks thrust deeper into the border town and destroyed nearby orchards in their search for hidden Hamas tunnels.
"Columns of people are heading west of Beit Hanoun, looking for a safe shelter. This is not war, this is annihilation," said 17-year-old Hamed Ayman.
"I once dreamt of becoming a doctor. Today I am homeless. They should watch out for what I could become next," the youth told Reuters.
Gaza officials said that so far in the 16-day conflict, 475 houses had been totally destroyed by Israeli fire and 2,644 partially damaged. Some 46 schools, 56 mosques and seven hospitals had also suffered varying degrees of destruction.
"There seems to be a strong possibility that international humanitarian law has been violated, in a manner that could amount to war crimes," the U.N.'s Pillay told an emergency session at the UN Human Rights Council in Geneva.
She also condemned indiscriminate, militant rocket and mortar attacks out of Gaza.
Israeli Justice Minister Tzipi Livni said the U.N. rights council was an "anti-Israel" body.
"Israel is acting according to international law. It is acting against terrorism. It is regrettable civilians are killed, but when we call on them to vacate and Hamas calls on them to stay, then that is what happens," she told Israel radio.
Looking to up pressure on Hamas, another member of Netanyahu's inner security cabinet, Gilad Erdan, said the time might have come for Israel to expand its war aims, which were previously limited to hitting rocket stockpiles and tunnels.
"It has become evident that there is no-one worse than Hamas, so we should start considering a goal of toppling Hamas and hitting all their leaders," he told Israel Radio. (Additional reporting by Arshad Mohammed and Maayan Lubell in Jerusalem, Noah Browning in Gaza, Amena Bakr in Doha and Stephanie Nebeha in Geneva; Writing by Crispian Balmer; Editing by Anna Willard)
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