JERUSALEM, July 2 (Jeffrey Heller/Reuters) - Israeli Prime Minister Benjamin Netanyahu is looking forward to a warmer White House welcome from President Barack Obama next week after their relationship hit a low point over Jewish settlement policy.

Due at the White House on Tuesday for talks postponed a month ago after a deadly raid on a Gaza aid flotilla, Netanyahu will be able to point to boxes he has ticked -- albeit in pencil -- on Obama's wish list of steps towards peace.

Netanyahu and Obama, an Israeli official said, will have a photo availability after a low-key March meeting widely seen as a snub by a president out to show his disapproval of Israeli settlement on land Palestinians want for a state.

No photo-op was offered as a feud flared over a settlement project, but White House spokesman Robert Gibbs said this time there would be a photo spray, usually statements by the president and a visiting leader to reporters in the Oval Office.

Echoing Washington, Netanyahu will voice a desire to upgrade current Israeli-Palestinian negotiations to face-to-face meetings, instead of the slow-moving proximity talks currently mediated by Obama's Middle East envoy George Mitchell.

I hope and I believe that a main part of my conversations with President Obama in Washington next week will be focused on how to start direct peace talks between Israel and the Palestinians right away, Netanyahu said.

I am ready to meet (Palestinian) President (Mahmoud) Abbas today and tomorrow and the next day at any place, he said at a U.S. Independence Day celebration at the home of the American ambassador.

Daniel Shapiro, an Obama Middle East adviser, told reporters that indirect talks had dealt with the core issues of the conflict and narrowed the gaps between the sides, but he said it was still too early for a timetable on moving to direct talks.

Gibbs said Netanyahu and Obama would discuss the need and hope to get quickly to direct talks and confer on regional security, bilateral issues and Israel's recent policy changes in Gaza, the easing of a land blockade of the Hamas-run Strip.

Netanyahu announced all goods except weapons and material that could be used to make them would be allowed into the Gaza Strip, in the wake of a world outcry over the killing of nine pro-Palestinian Turks in a melee on a blockade-running aid ship boarded by commandos on May 31.

In a message Netanyahu could not ignore amid his country's deepening international isolation, Obama made clear he viewed the situation in the Gaza Strip as unsustainable.

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But showcasing a warmer tone toward Netanyahu could be in Obama's political interests, after Washington was angered by Israel's March 9 announcement -- during a visit by U.S. Vice President Joe Biden -- of plans to build 1,600 more settler homes in an area of the West Bank it annexed to Jerusalem.

With congressional elections looming in November and the president hoping to stave off big losses by his Democratic Party, Obama is mindful that support for Israel is strong among lawmakers and voters.

He has repeatedly voiced a commitment to Israeli security and to curbing what Israel and the West see as an Iranian nuclear programme aimed at producing atomic weapons -- an issue Israeli officials said would be high on the two leaders' agenda.

One option Netanyahu and Obama may explore is extending beyond September a 10-month Israeli moratorium on new housing starts in Jewish settlements in the occupied West Bank, a limited freeze agreed under pressure from Obama.

But that could put strain on Netanyahu's governing coalition, which includes a key far-right party, and the Palestinians have given no sign publicly that it would be enough to coax them into more intensive statehood negotiations.

We cannot talk about a meaningful peace process and we cannot move to direct negotiations unless there is progress on the issues of borders ... and security, chief Palestinian negotiator Saeb Erekat said.

Palestinian officials said that entails shaping the frontiers of a future Palestinian state -- including territorial swaps with Israel -- along lines that existed before the 1967 war in which Israel captured the West Bank and Gaza Strip.

For Palestinians, it also means Israeli troops and roadblocks are replaced by international forces in key areas.

For his part, Netanyahu was playing to his own right-wing constituents and Likud party colleagues by insisting that East Jerusalem, which Palestinians want as their capital, is not included in the West Bank housing start freeze.

He declared defiantly on the eve of his previous talks with Obama, that Jerusalem, which Israel considers its capital, is not a settlement. But no new Jewish homes have been built in East Jerusalem or Palestinian dwellings demolished in months.

Most recently, a planning commission in Israel's Jerusalem municipality approved a park project in which 22 Palestinian homes, built without permits that Palestinians say are impossible to obtain, are due to be razed.

However, amid international condemnation of the park project, city officials say the demolitions are not imminent.

It will be Netanyahu's fifth meeting with Obama since the president took office 15 months ago. After Washington, he will visit New York for a meeting with American Jewish community leaders.