NOW that Israelis and Palestinians have staked out remarkably similar positions on attending Middle East peace talks, the closed-door diplomatic effort to narrow their differences has begun in earnest.Last week, after five months of often frustrating shuttle diplomacy, United States Secretary of State James Baker III succeeded in extracting a conditional "yes" from Israel to attend an October peace conference, provided no Palestinians unacceptable to the Jewish state take part. The Israeli Cabinet endorsed the stance yesterday. "That was the yes I was looking for from Israel," a pleased Mr. Baker said Thursday. The following day, the secretary got something less than a qualified "yes" from three Palestinian residents from the Israeli-occupied territories, but it was not far from it. Baker left the session with a list of Palestinian conditions for attending a conference, an event the Palestine Liberation Organization (PLO) said it would "welcome." "The PLO answer [to Baker] was, let's say, a positive inclination," says Hanan Ashrawi, who, like the other Palestinians to meet with Baker, says she answers to PLO headquarters in Tunis. Despite the differing semantics, both sides have indicated a willingness to attend peace talks sponsored by the US and the Soviet Union, but under certain, specific conditions. And both sides say they are awaiting written American assurances on these issues before making a commitment to attend. Israeli demands center on the following: that PLO members or supporters and Palestinian residents of East Jerusalem do not take part in a joint Jordanian-Palestinian delegation. The Israelis have said in recent days that Baker has privately agreed to these conditions. The Palestinians who met with Baker acknowledged pressure to bend on the makeup of a delegation, especially the East Jerusalem resident. "Baker told us that the American position continues to be there will be no [Israeli] veto on Palestinian representatives, but he trusts that Palestinians understand [American] constraints," says Faisal Husseini, leader of the Palestinian delegation. Israel annexed East Jerusalem after seizing it from Jordan in the 1967 Six-Day War, and Israelis are loathe to relinquish control. But most countries do not recognize Israeli sovereignty there and consider it part of the occupied territories. Any negotiations regarding East Jerusalem's final status will almost certainly be postponed to a later stage. These and other written guarantees being sought by Israel could emerge soon from talks here between Baker deputies Dennis Ross and John Kelly and Israeli officials. Meanwhile, Palestinians will be waiting for Baker's reply to their demands, which in addition to a role for the PLO and East Jerusalem residents, include: that the aim of a peace conference should be Israel's withdrawal from all Arab territories occupied in 1967, that Palestinians have the right to self-determination, and that Israel freeze all building in the occupied territories. Mr. Husseini said Friday that a Palestinian answer to Baker could come in "days, not months," suggesting intensive behind-th e-scenes diplomacy. After leaving Israel Friday, Baker went on to Jordan, Morocco, Tunisia, and Algeria, which all have close ties with the PLO. Baker is counting on them to help nail down Palestinian support for a peace conference. "Palestinians have more to gain from a viable and active peace process than almost anyone else ... and have the most to lose if there is no process," Baker said at a joint news conference with Jordan's King Hussein Friday. After Baker met with King Hassan of Morocco Saturday, a senior US official told Reuters the peace process had gone so far that it would be difficult if not impossible for Palestinians to say no. "The two toughest nuts to crack were Syria and Israel. My instinct is [the Palestinians] will find a way to participate," the official said. Israeli Prime Minister Yitzhak Shamir, whose "yes" to Baker skillfully shifted the political debate away from Israeli intransigence to Palestinian foot-dragging, won his Cabinet's approval, 16-3, but not without getting an an earful from extremists opposed to compromise.