* Clinton wraps up round of Israeli-Palestinian talks
* Palestinians say settlement building will end talks
* Netanyahu reaffirms he will allow partial freeze to expire
* U.S. Middle East envoy holds talks with Syrian leader
(Adds Arab League position in paragraph 20)
By Jeffrey Heller
JERUSALEM, Sept 16 (Reuters) - U.S. Secretary of State Hillary Clinton ended three days of talks with Israeli and Palestinian leaders on Thursday with no visible sign of progress on breaking a deadlock over building in West Bank settlements.
The Palestinians reiterated a threat to leave the nascent negotiations if settlement construction were to resume when a moratorium expires on Sept. 30, and Israel reaffirmed it would would not extend the freeze, even for a limited period.
On another possible peace track, U.S. Middle East envoy George Mitchell met Syrian President Bashar al-Assad in Damascus and said Washington's focus on an Israeli-Palestinian deal would not deflect it from pushing for an Israeli-Syrian accord.
In an interview with Israel's Channel 10 television, Clinton said it would be "extremely useful" if Israel agreed to a limited extension of the 10-month, partial settlement freeze.
But officials close to the talks said Prime Minister Benjamin Netanyahu had rejected a proposal to extend the moratorium by three months.
At a meeting of the Arab League in Cairo, Palestinian Foreign Minister Riyad al-Malki restated the Palestinian threat to leave the negotiations "if one settlement is built after the end of the freeze".
Wrapping up a round of negotiations that began in Egypt on Tuesday, Clinton held talks in Jordan with King Abdullah after meeting Palestinian President Mahmoud Abbas in the West Bank city Ramallah.
"Today, His Majesty and I discussed ongoing negotiations and I expressed my confidence that Prime Minister Netanyahu and President Abbas can make the difficult decisions necessary to resolve all of the core issues within one year," she told a news conference in Amman.
Those issues include the borders of a Palestinians state and the future of settlements, Jerusalem and Palestinian refugees.
COMPROMISE
Egyptian President Hosni Mubarak told Israel's Channel 1 TV he had raised the idea with Netanyahu to keep the moratorium in place for another three months, hoping to buy time for negotiators to agree on the borders of a Palestinian state.
Israel has said such a deal could entail a land swap under which it would keep major settlement blocs in the West Bank, territory it captured from Jordan in a 1967 Middle East war.
Officials close to the talks said the United States, which launched the face-to-face negotiations in Washington on Sept. 2 after a 20-month hiatus, had made a similar proposal. U.S. officials declined to comment.
In Damascus, Mitchell, who had accompanied Clinton to the region, told reporters: "Our effort to resolve the Palestinian-Israeli conflict in no way contradicts or conflicts with our goal of a comprehensive peace including peace between Israel and Syria."
Israel and Syria last held direct peace talks in the United States in 2000, but failed to reach agreement on the future of the Golan Heights, a strategic plateau captured by Israeli forces in 1967 and which Damascus wants back.
Four rounds of indirect talks that were mediated by Turkey broke down in 2008. Syria plays host to exiled leaders of the Hamas Islamist group that runs the Gaza Strip and opposes Abbas's peace efforts.
Focusing on the U.S. drive to broker Israeli-Palestinian peace, Clinton said in an interview with ABC News in Jerusalem that hard work was under way "to make sure there remains a conducive atmosphere to constructive talks".
Israeli and Palestinian negotiators were due to meet next week and set a new date for leaders to convene.
In a statement, Netanyahu's bureau said he was standing by his position not to extend the moratorium. He has said, however, he intends to limit the scope of future settlement construction.
The settlements are deemed by the World Court to be illegal, a finding disputed by Israel. Palestinians fear the enclaves will deny them a viable and contiguous country.
Meeting in Brussels on Thursday, European leaders issued a statement also calling on Israel to extend the moratorium.
The Arab League's chief, Amr Moussa, said "negotiating while settlements are built is a waste of time".
As part of U.S. President Barack Obama's drive for a wider peace between Israel and the Arab world, Mitchell plans to visit Lebanon to meet Lebanese leaders.
In the Hamas-run Gaza Strip overnight, Israeli aircraft carried out three air strikes against suspected militant targets after rocket and mortar bomb attacks on Israel. No casualties were reported in the incidents. (Additional reporting by Mohammed Assadi in Ramallah, Arshad Mohammed in Amman, Khaled Yacoub Oweis in Damascus, Deborah Charles in Washington, and Dina Zayed, Marwa Awad, and Ayman Samir in Cairo; Editing by Peter Graff)
Our Standards: The Thomson Reuters Trust Principles.
