Israeli Prime Minister, Ehud Olmert, set forth a number of conditions before any truce with the Islamist Hamas goes into effect, the Saudi-based aL-Wattan newspaper quoted Palestinian sources as saying.   The newspaper reported that Palestinian sources said among the Olmert's conditions are: Hamas should halt homemade shells fire from Gaza onto nearby Israel, prevent other Palestinian groups from firing such shells and stop smuggling of weapons.   AL-Watan pointed out that Olmert expressed Israel's readiness to fix a ceasefire deal with the Palestinians, provided that such a deal be confined to the Gaza Strip, stressing that the Palestinian authority should take control of Gaza's crossings.   In the meantime, Olmert warned of any escalation from the Gaza Strip against Israel, saying that Israel's response then will be unprecedented.     The ruling Hamas in Gaza has offered a ceasefire deal with Israel, provided that such a ceasefire include the West Bank as well.   The Israeli prime minister's remarks come as the situation on the ground has recently seen a military escalation, with Palestinian groups carrying out a cross-border attack and Israeli army attacking a central Gaza refugee camp.