At this time last year, many people in this settlement started eyeing their future with increased doubt.

Some 8,000 Jewish settlers had just been forcibly removed from Gaza, and people here learned that Karnei Shomron was going to be outside the separation barrier – a high-security network of walls and fencing that Israel is building inside the West Bank.

Today, things look much different, underscoring just how the turmoil in Gaza and the war with Lebanon has affected Israeli politics.

The route of the controversial barrier, yet to be built here, is now promised to encompass – rather than exclude – Karnei Shomron. Israel's Office of Building and Construction just issued permits for 20 new houses, along with 56 for the neighboring Alfei Menashe settlement and another 88 for Ariel, one of the largest West Bank settlements.

To the town council leader, permission to build 20 houses is a merely a drizzle in a drought. Over the past year, he says, more than 100 young people who grew up in Karnei Shomron married and want to settle down close to their families, but cannot find housing.

"It's been a long time that we haven't been allowed to build," says Herzl Ben-Ari, the head of the town council, using a laser pen to point out the open spaces on the topographical map that hangs in his office. He wants to put housing on each plot of land considered to be within the settlement's borders. His dream: to turn the settlement of 6,700 into a city of 20,000.

Palestinian dreams, of course, look markedly different, including the establishment of an independent state, a goal they view as incompatible with settlement expansion. To them, and to US officials hoping to coax Israeli and Palestinian leaders back to the negotiating table, news of settlement growth only complicates efforts.

Secretary of State Condoleezza Rice was due to meet with Palestinian and Israeli leaders Wednesday in an attempt to "explore ideas" and pursue "a way forward" in the impasse, US officials here say.

"We see the road map as the best way forward, and among Israel's road map obligations is to remove illegal settlement outposts and to cease settlement expansion," says Stewart Tuttle, the spokesman for the US embassy in Tel Aviv, referring to the plan that calls for a series of steps leading to an independent Palestinian state living peacefully alongside Israel. "It is our expectation that the Israeli government will abide by those commitments."

The future of Israel's settlements in the West Bank has been a moving target over the course of the past half-year. When he was elected six months ago as the head of the Kadima party, Prime Minister Ehud Olmert said that he would pursue a new "realignment plan" in order to continue with the course of unilateral withdrawals pioneered by Ariel Sharon.

Just as Mr. Sharon pulled out of Gaza without negotiating with the Palestinians, Mr. Olmert said he would withdraw from several West Bank settlements deemed untenable because they are far away from others, or too far from the 1967 Green Line.

This summer's Israeli-Hizbullah war, however, has changed the mood for one-way, one-time-only moves that haven't been negotiated as part of a comprehensive plan. Under sharp criticism from many during the war, Olmert said that he was reconsidering the realignment plan.

"The idea of realignment is still alive, but it needs to reassessed," Miri Eisin, the Israeli government spokesman, told reporters Wednesday. She said that Olmert was committed to removing "illegal outposts" in the West Bank.

The war nearly eclipsed the Israeli-Palestinian conflict, which had reached a boiling point in Gaza in June, following the kidnapping by Hamas-affiliated militants of an Israeli army corporal, Gilad Shalit.

But while cameras were focused on the Israeli-Lebanese conflict, building in illegal outposts in the West Bank accelerated, an Israeli organization that keeps track of settlement growth says. Peace Now, a left-wing organization opposed to settlement in the occupied territories, charged this week in its biannual report that during the war, 31 illegal outposts underwent expansion and infrastructure works, while 12 outposts saw the construction of permanent buildings.

"Illegal outposts" are classified as small, newer satellite settlements that were established without official permission.

According to the Haaretz newspaper, which bases its figures on the Interior Ministry's population registrar, from June 2005 to June 2006, the settler population in the West Bank grew by 5.3 percent. About 3.5 percent was attributed to babies born to families living in the settlements.

A spokesman for Israel's Ministry of Construction and Housing says that the permission to build new houses in the settlements is independent of political events.

"All we've done is give the developers the permission to build houses," says Kobi Blich, a ministry spokesman. "It's got nothing to do with timing. It's simply part of the plan of allowing natural growth."

Demographically, Israel is indeed finding itself with a burgeoning challenge: A new generation of Israelis who grew up in the settlements wants to stay.

In Israel's 58 years of statehood, it has controlled the West Bank for four decades. Shimon Peres, Israel's vice prime minister and an architect of the Oslo Peace Accords, said in a meeting in London last week that "the settlers' children cannot be stopped from building their homes," adding that this issue is one of Olmert's major problems.

That picture has certainly put a dent in Tzvia Shelter's honeymoon. The newlywed and her husband, both born and raised here, were married two weeks ago. Now, they're living in someone's basement – and feeling frustrated that there's nowhere else for them go.

"Our parents are here, all our friends are here, and it's our home. To leave it … is out of the question, but there are also no possibilities to stay here," she says.

The fact that 20 new houses could be built soon, she says, is little consolation. Competition will be fierce, a fact confirmed by a real estate agent in the area.

"There are about 100 couples here who want 20 units," Mrs. Shelter gripes. "Twenty units is enough to say, 'Oh, we gave you something, so don't complain.' And to the Americans, it won't seem like that much."