JERUSALEM, Oct 16 (Maayan Lubell/Reuters) - Israel bused 430 Palestinian prisoners under heavy guard to a holding facility in the Negev desert on Sunday in preparation for them to be exchanged on Tuesday for captive Israeli soldier Gilad Shalit, officials said.

The prisoner swap, to take place in the nearby Egyptian desert region of Sinai, should bring to a close a saga that has obsessed Israelis over the five years of Shalit's captivity.

An official involved in the Egyptian-mediated talks confirmed to Reuters the sides had agreed in last-minute talks that Tuesday is the day for the handovers.

Israel posted a list of all 477 prisoners due to go free, along with Shalit, in the first stage of the deal also brokered in part by Germany, opening the way for anyone opposed to their release to file a legal appeal within 48 hours.

Unless the Supreme Court intervenes, or someone in Gaza goes nuts, it appears the deal will go through in two days, Yaakov Amidror, national security adviser for Israeli Prime Minister Benjamin Netanyahu, told Army Radio.

Those on the release roster included Palestinians jailed for attacks in which dozens of Israelis were killed. At least five prisoners have been in jail since their teens.

Forty-seven further Palestinians slated for release on Tuesday were moved to a holding cell in central Israel.

Some of the 477 will go home to the West Bank and Gaza Strip, while others will be exiled to third countries, as yet unnamed, without stopping on Palestinian soil.

The Islamist Hamas rulers of Gaza prepared a heroes' welcome for 295 of the prisoners due to be sent to the territory. Workmen hammered together an open-air stage and streets were decorated with Hamas and Palestinian flags.

I am so happy I do not know what I will do, how will I hold him? It's been 20 years, said the mother of Baseem al-Kurd, a Hamas member who was sentenced in 1992 to eight life sentences for attacks that killed Israelis.

Workers readied an apartment for Kurd in Gaza, painting walls and repairing doors.

Shalit, a tank crewman captured in 2006 by militants who tunnelled into Israel from fenced-off Gaza and spirited him into the enclave, was expected to be handed over in Egypt's adjacent Sinai desert and flown to Israel.


EMOTIONAL ISSUE

Israel, which withdrew troops and settlers from Gaza in 2005, tightened its blockade of the small coastal territory after Shalit was seized.

The repatriation of captured soldiers, alive or dead, has long been an emotionally charged issue for Israelis, many of whom have served in the military. But they also feel a sting over the release of Palestinians convicted of killing Israelis.

Israel has said that around 300 of the 1,027 being freed in both stages of the deal were involved in violent crime. The second phase calls for the release of 550 prisoners.

In all, there are some 6,000 Palestinians in Israeli jails.

An opinion poll by Channel 10 TV showed the exchange was backed by two-thirds of Israelis. Shalit, now 25, was last seen, looking pale and thin, in a 2009 video shot by his captors.

Photos of Shalit's father, Noam Shalit, raising an Israeli flag over the roof of the family home, featured prominently in Israeli newspapers on Sunday.

One Israeli group opposed to the deal, the Almagor Terror Victims' Association, said the exchange would lead to more violence and abduction attempts.

The judges should explain to terror victims how they allow Israelis to be murdered and (for the killers) to be released. They should look them in the eyes and explain, Meir Indor, head of Almagor, told Israeli television.

Gila Edri-Dekel, whose brother Sharon was abducted and killed by Palestinian militants in 1996, said her family has been in a state of angst since hearing that his killers were to be released in the swap.

To see the number of prisoners released, to see his killers released, it is another punishment for my mother, Edri-Dekel told Army Radio.

Israel's Supreme Court will hear the group's petitions against the swap on Monday. Hours beforehand, the court took the rare step of granting Noam Shalit's request to argue himself in its chambers in favour of the deal for his son.

In a televised appeal, the soldier's mother Aviva Shalit, said we understand their heavy hearts of Israeli attack victims, but cautioned any delay in implementing the sensitive deal is liable to put Gilad at risk.

For Palestinians, prisoners held by Israel are revered fighters against Israeli occupation in a quest for a Palestinian state.

The deal with Hamas, a group classified by the United States and European Union as a terrorist organization over its refusal to recognize Israel and renounce violence, is not expected to have a direct impact on efforts to revive Middle East peace talks.

Palestinian President Mahmoud Abbas has been pursuing U.N. recognition of Palestinian statehood in the absence of negotiations with Israel that collapsed 13 months ago in a dispute over settlement-building in the occupied West Bank. (Writing by Allyn Fisher-Ilan; Additional reporting by Ari Rabinovitch in Jerusalem and Nidal al-Mughrabi in Gaza; Editing by Mark Heinrich)