By Tom Perry

JERUSALEM (Reuters) - The huge Palestinian prisoner release won by Hamas in exchange for a lone Israeli soldier has drawn praise from those in the Middle East who believe violence is the only way to deal with Israel, unsettling President Mahmoud Abbas' camp and chipping away at what faith is left in his strategy of negotiating peace.

To shore up his domestic credibility, Abbas may now feel he has to escalate the diplomatic offensive he is waging for Palestinian statehood at the United Nations, raising the prospect of more tension with the United States and Israel.

The lopsided swap will allow Hamas to rest on its laurels for a spell. That could suit the Islamist movement, whose focus at present is on rebuilding Gaza, not fighting Israel.

Hamas will send Gilad Shalit home to Israel on Tuesday after more than five years a prisoner in Gaza, in return for the release of 1,027 Palestinians.

The deal represents the most Israel has conceded to an enemy since 2008, when it swapped five Lebanese for the bodies of two Israeli soldiers held by Lebanon's Hezbollah.

Critics of the Ramallah-based Palestinian Authority headed by Abbas say the new swap is far more than he has extracted from Israel in years of on-off negotiations aimed at agreeing to a peace treaty and creation of a Palestinian state next to Israel.

Privately, even Abbas's allies are concerned that the swap boosts the "logic of resistance" -- or armed struggle against Israel -- at the expense of his non-violent strategy built on negotiations and, most recently, the diplomatic thrust for wider recognition of Palestinian statehood.

"This deal has definitely improved the public position of Hamas and the perception of resistance," said one member of the Abbas administration. "The success of this deal sends the wrong message to the public."

Abbas strongly opposes any form of violence by the Palestinians and his security forces in the West Bank cooperate with Israeli security forces.

But peace talks with Israel have, by his own admission, hit a dead end while Jewish settlements continue to expand in the West Bank, consuming territory seen by Palestinians as central to their goal of a viable state.

This has raised serious questions about the role of the Palestinian Authority and led to his quest to gain U.N. recognition of Palestinian statehood on land Israel captured in the 1967 Middle East war.

HEZBOLLAH APPLAUDS HAMAS

His initiative has won widespread support among Palestinians, who have applauded Abbas for persevering in the face of U.S. and Israeli objections. But its initial impact has been economic pain: the United States has frozen aid that has helped keep the Palestinian economy afloat in recent years.

"Abbas made the most peaceful move you can imagine: going to the United Nations. And yet he got this brutal political response by Israel and the United States," the Palestinian official said. "That's also a negative message to the public about the productivity of this peaceful approach."

Hamas, by contrast, has chalked up a major success in an emotive issue for Palestinians, securing the release of hundreds from jail through indirect negotiations brokered by Egypt.

Hezbollah, a Lebanese guerrilla group and political party backed by Iran, was quick to applaud the prisoner swap as proof of the efficacy of the approach employed by Hamas, its ally.

It said the deal had "toppled once and for all the delusions of those who believe in the possibility of progress or the recovery of rights through negotiations or petitioning the international community."

It was a clear reference to Abbas, who has justified the application for U.N. membership as an attempt to strengthen the Palestinians' hand ahead of any more talks with Israel.

"The Palestinian leadership will be under pressure to think of the next move," said George Giacaman, a political scientist at Birzeit University in the West Bank. "Their back is to the wall and they might be pressed to do something to maintain internal solidarity," he said.

At the diplomatic level, Abbas' options include seeking an upgrade to the Palestinian status at the United Nations once their application for full membership is rejected. They could build on that by pursuing legal action in international courts against Israel, for example, over the 2008-09 war in Gaza.

That war had a lopsided outcome in favor of Israel. Some 1,400 Palestinians were killed while 13 Israelis lost their lives. As the dominant militant movement in the blockaded Gaza Strip, Hamas is currently keeping a lid on groups who would like to be firing more rockets into Israel -- the tactic which triggered Israel's hammer blow in December 2008.

Hamas has now promised to secure the release of more prisoners, though its enthusiasm for the kind of raid that led to Shalit's capture in 2006 could be tempered by the responsibilities it now faces governing Gaza.

A delicate regional situation may also dissuade it from embarking on military adventures any time soon. Hamas is trying to forge ties with Egypt's new government and Syria, the base of its leadership in exile, faces an persistent popular uprising.

Mustafa Barghouti, a Palestinian politician and activist, said the prisoner swap showed the need for action to extract concessions from Israel. But future "resistance" need not be violent, he said.

"I think the prisoner swap comes at a good time. It reaffirms the power of resistance at a time when all Palestinian groups are adopting non-violent resistance," he said.