NEGOTIATIONS on the fate of the 11 Western hostages went underground yesterday, as Israel held firm to its demand for signs of life from its missing soldiers in Lebanon before freeing any prisoners.Hopes that the Israeli government might make some gesture, such as freeing a handful of its low level Lebanese prisoners, in order to maintain the momentum started by the release of two Western hostages last week, have proved fruitless. Premier Yitzhak Shamir and his senior aides are adamant that they will make none of the concessions the hostages' captors are demanding of Israel until they know what happened to their "missing in action." "If we do not hang together, we hang separately," as one Foreign Ministry official here put it. And after withstanding earlier pressure from London and Washington to act unilaterally, Israel appears to have won general understanding for its position. Linking the POW/MIA issue with the hostage crisis has strengthened Israel's hand in retrieving its soldiers, but also carries risks, officials here concede. Should the groups who hold missing Israelis, or their corpses, not provide details Israel is demanding, the Western hostages might not be released, and Israel's obduracy could be blamed for their continued incarceration. On the other hand, if Israel were to release Lebanese prisoners in return for Western hostages, without winning back its own soldiers, the implications for the future would be dire. "We cannot afford to be drawn into a situation where we pay for non-Israeli hostages, because there is a never ending supply of such hostages in Lebanon," explains one Israeli source. "Imagine what would happen in the United States if Israel let the Shiite prisoners go this time in return only for Americans," the source says. "When the situation happened again, there would be enormous public pressure to make us give up again." Although Israel has demanded "signs of life" from its MIA's before releasing any prisoners, Israeli officials say privately that clear evidence that a soldier was dead would be equally acceptable. But Israeli negotiators insist that they be given cast-iron proof of the fate of all seven soldiers who have disappeared in Lebanon since 1982. Officials worry that if the whereabouts and fate of any of the seven are left unresolved this time, one or more might be presented alive at some later stage by captors, who would then demand a new price from Israel for their release. Meanwhile the Israeli government has rejected radical Palestinian leader Ahmed Jabril's demand that it free 18,000 Palestinian prisoners in return for the western hostages. "Our decision is to release only Shiites, only Lebanese," the Foreign Ministry official said yesterday. Israeli sources are also dubious as to whether Mr. Jabril, head of the Syrian-backed Popular Front for the Liberation of Palestine - General Command (PFLP-GC) really knows that three of the Israeli MIA's are alive, as he claimed on Wednesday. His statements are seen here as a bid to win the release of Palestinian prisoners in Israeli jails - who number some 14,000 according to the Israeli human rights group B'Tselem - and who do not appear to interest the captors of the Western hostages. Privately, officials here say that if the release of some intifadah (uprising) activists became the only remaining stumbling block to a comprehensive hostage and prisoner deal, the demand could be accepted. But Jabril's intervention has further complicated a process that seems likely to call for "strong nerves and patience" in the words of Israeli negotiator Uri Slonim.