* Palestinians warn will leave talks if Israel stays away
* Israeli premier sees protracted conflict
* Gaza rockets, mortars target southern Israel
* 1,893 Palestinians, 67 Israelis killed in month of war (Updates status of Cairo talks, Hamas comment, West Bank killing)
By Nidal al-Mughrabi and Jeffrey Heller
GAZA/JERUSALEM, Aug 10 (Reuters) - Israel said on Sunday it was prepared for protracted military action in Gaza and would not return to Egyptian-mediated ceasefire talks as long as Palestinians kept up cross-border rocket and mortar fire.
The head of the Palestinian delegation in Cairo had said it would leave unless Israeli negotiators, who flew home on Friday hours before a three-day truce expired, came back to the talks. But Egypt's state news agency, MENA, said the Palestinians would remain for an urgent meeting with the Arab League on Monday.
Israeli air strikes and shelling killed three Palestinians in Gaza on Sunday, including a boy of 14 and a woman, medics said, in a third day of renewed fighting that has jeopardised international efforts to end a more-than-month-old conflict.
Since the last truce expired, Palestinian rocket and mortar salvoes have focused on Israeli kibbutzim, or collective farms, just across the fortified border in what appeared to be a strategy of sapping the Jewish state's morale without triggering another ground invasion of the tiny Gaza Strip.
The violence has become less intense than at the war's outset, down from more than 100 rocket bursts a day including at major cities like Tel Aviv, which have not come under attack since Israel withdrew ground forces from Gaza on Tuesday.
Before the truce ran out on Friday, Israel said it was ready to agree to an extension. Gaza's ruling Hamas did not agree, demanding an end to an economically stifling blockade of the coastal enclave that both Israel and Egypt, which regards the Islamist movement as a security threat, have imposed.
Israel has resisted easing access to Gaza, suspecting Hamas could then restock with weapons from abroad.
A sticking point has been Israel's demand for guarantees that Hamas would not use any reconstruction supplies sent to Gaza to build more tunnels of the sort that Palestinian fighters have used to infiltrate the Jewish state.
"Israel will not negotiate under fire," Prime Minister Benjamin Netanyahu said in public remarks at the weekly meeting of his cabinet in Tel Aviv.
"At no stage did we declare (Israel's military offensive) was over. The operation will continue until its objective - the restoration of quiet over a protracted period - is achieved. I said at the beginning and throughout the operation - it will take time, and stamina is required."
Hamas spokesman Sami Abu Zuhri said Netanyahu, by threatening to press on with Israel's military offensive, would be "fully responsible for the failure of the Cairo negotiations and for all the consequences that may result".
The Palestinian negotiating team represents Hamas as well as the party of U.S.-backed President Mahmoud Abbas, who governs in parts of the West Bank not occupied by Israel.
Egypt is meeting separately with each party, given that Hamas rejects Israel's right to exist and Israel regards the group as a terrorist organisation.
Palestinian hospital officials said 1,893 people, most of them civilians, have been killed since the July 8 launch of Israel's military campaign to quell rocket fire from Gaza. Israeli bombardment has caused widespread devastation in the densely populated, largely urban territory.
Israel has lost 64 soldiers and three civilians to the war, whose toll on non-combatants in impoverished Gaza, where thousands of homes have been damaged or destroyed, has drawn international alarm and condemnation.
Israeli tanks and infantry left the enclave on Tuesday after the army said it had completed its main mission of destroying more than 30 tunnels dug by guerrillas for cross-border attacks.
In renewed fighting since the end of a three-day truce on Friday, Israel has killed 16 Palestinians in air strikes. Militants have fired more than 100 projectiles, mostly short-range rockets and mortar bombs, at Israel.
Though Israel's Iron Dome rocket interceptor does not work at such short ranges - a version called "Iron Beam" is being developed to shoot down mortars - there have been few casualties, largely because as many as 80 percent of the border kibbutzim's 5,000 residents fled before last week's ceasefire.
Some said on Sunday they would not return to their communities, which have long been symbols of Israel's pioneering spirit - an abandonment likely to raise pressure on Netanyahu.
"I heard the prime minister's various speeches, but we see the reality of the situation here," Yossi Wagner, a member of the skeletal security team at Kibbutz Nahal Oz, told Israel's Army Radio. "We have decided that at this stage we are not recommending that members return to the kibbutz."
Inside a U.N.-run school in Gaza where at least 2,500 Palestinians have taken shelter, Bashir Abed sat in the shade at a classroom desk, watching his infant son playing nearby.
"I say to the delegation (in Cairo), if you do not secure the demands of the people, you have to leave. Israel does not want peace, Israel wants to give us only one percent of our rights. Israel is stalling," Abed said.
In the West Bank, where the Gaza war has stoked tensions, Israeli soldiers killed an 11-year-old Palestinian boy during a clash with rock-throwing protesters. The boy's uncle said he was shot even though he was not taking part in the disturbances. An Israeli military spokeswoman said she was checking the report.
(Additional reporting by Lin Noueihed in Cairo, Dan Williams and Allyn Fisher-Ilan in Jerusalem, Ali Sawafta in the West Bank; Writing by Jeffrey Heller; Editing by Mark Heinrich)