NAHR AL-BARED, LEBANON, May 18 (Alistair Lyon/Reuters) - Like the crowds of Palestinian refugees who rattled Israel's border fences this week, Subhia Loubani yearns to return to the homeland she had to flee when the Jewish state was created in 1948.

Even though, unlike most of them, she has a brand-new house.

Loubani, 72, received a key last month to one of the first few homes built by UNRWA, the UN agency for Palestinian refugees, in north Lebanon's Nahr al-Bared camp, which was utterly destroyed in fighting nearly four years ago.

Still, she said, given a chance, I'd leave the house and go to Palestine, my country. I can't forget Palestine.

Sunday's border protests, in which Israeli gunfire killed at least 13 people, were a reminder that the plight of 4.5 million Palestinian refugees, often ignored in interim peace deals, lies at the core of an Arab conflict with Israel that has reverberated across the Middle East and beyond for decades.

US President Barack Obama, keen to revive long-stalled Israeli-Palestinian negotiations, said this week the unrest sweeping the Arab world made peace efforts even more vital.

He has offered no new ideas to break the deadlock and it is not clear whether he will unveil any in a speech he is due to deliver on the Arab spring on Thursday. For Palestinian refugees, no peace deal that sidelines them will stick.

Israel rejects any right of Palestinians to return to the land they lost as tantamount to the Jewish state's destruction.

Al Qaeda, among others, has exploited an enduring sense of injustice that helps keep the region volatile and unstable.

In Nahr al-Bared, battles between the Lebanese army and Fateh al-Islam militants inspired by al Qaeda flattened the tiny coastal shantytown that was once home to up to 30,000 people.

Perhaps the trove of computer data found when US troops killed Osama bin Laden in Pakistan on May 2 will reveal whether the obscure Islamist faction had any direct ties to al Qaeda.

The Nahr al-Bared fighting in 2007, Lebanon's worst internal strife since the 1975-90 civil war, killed more than 400 people, 170 of them soldiers, and pulverized 6,000 homes.
              

HEADLONG FLIGHT

Loubani's family ran away from the army's tank and artillery fire, losing everything except the clothes they were wearing.

When I left Nahr al-Bared, I felt I was leaving Palestine again, said the elderly widow, recalling that collective trauma known to Palestinians as the Nakba, or national catastrophe, whose anniversary was marked by the border rallies on May 15.

Loubani, only four years old in 1948, says her father had carried her from the village of Saasaa across the frontier into nearby Lebanon and a future of blasted dreams and despair.

The word nakba also springs easily to the lips of Jihad Awad, 49, a shoe-seller among the first refugees to be rehoused.

There's no worse catastrophe than this, he said of his family's flight from Nahr al-Bared and their wrecked home.

Last month, Loubani moved into her new house with two adult daughters. Light and airy compared to the dark squalor of most refugee camps, it is sparsely furnished -- the family spent the furniture grant they received from UNRWA on medical bills.

It is also bereft of any personal possessions, keepsakes or photos. The frail lady, who has a broken leg and uses a walking frame, even lost her children's birth certificates, her marriage contract and a cache of savings when she escaped the fighting.

Wearing a white headscarf and a faded shift dotted with pink flowers, Loubani cannot shake off her fear of another conflict.

Even when I sleep, I'm afraid I will wake to see the house destroyed again, she said. Only God knows when war erupts. The Israelis can come any time and bombard us, so we are afraid.

Loubani, whose husband died two months before the Lebanese army began what turned into a grinding 15-week struggle to crush the Fateh al-Islam guerrillas entrenched in Nahr al-Bared, said she had doubted she would ever return to her home there.

The army, which still tightly controls access, dynamited buildings in the area even after fighting in the camp ceased.

RISING FROM THE ASHES

Painfully slowly, UNRWA is rebuilding it from scratch with proper sewers and other amenities rare in refugee camps. The handover of the first housing units to refugees may lay to rest wild rumors they were destined for Lebanese or for tourists.

Residents recall the fate of Tel Zaatar, a Palestinian camp near Beirut where some of them lived until Christian militias, then backed by Syria, besieged and demolished it in 1976. Like two other camps overrun in the civil war, it was never rebuilt.

The crisis of confidence was acute in the period when we hadn't handed anything back, said Charles Higgins, who manages the UNRWA reconstruction project. That has evaporated, but now there is a justified impatience to say, 'well, get on with it'.

Clearance of unexploded ordnance, approvals from urban planning authorities and rescue work to preserve archaeological remains found beneath the camp have all contributed to delays.

The homes transferred in April form the first of 72 such clusters. UNRWA has funds to rebuild 40 percent of the camp, including its own facilities, six schools and a health centre.

Higgins voiced confidence that donors would provide further support once they could see the camp rising from the ashes. The funding gap is now estimated at $207 million, not including money needed to care for the refugees waiting to be rehoused.

The project, which he described as very difficult, quite frustrating and extremely hard work, had a symbolic value apart from benefiting the residents of Nahr al-Bared.

Palestinians aren't often people who are able to return somewhere with official sanction, Higgins said, citing cycles of forced migration and temporary shelter which some camp residents had experienced three or four times in their lives.

For them to move back somewhere, even if it's back to a refugee camp that existed for 60 years, is quite significant.

It will mean a lot to Fadi Tayyar, an UNRWA communications officer, who is waiting for his own home to be reconstructed.

Four years of my history are deleted. You are living, yes, but you feel you are not living until you go back.

I have lost the area where I was a child, where I played, where I cried, where I had accidents. So I miss it a lot, said Tayyar. My memory is still connected to these places.

(Editing by Jon Hemming)