GAZA, Jan 17 (Reuters) - Exhausted by lack of sleep, shattered by countless bombs and drained by bereavement, Gazans held out hope for a ceasefire between Israel and Hamas on Saturday, if only for a chance to collect their lives.

"We do not care how, we want a ceasefire. We want to go back to our homes. Our children need to go back to sleep in their beds," said Ali Hassan, 34, a father of five who is sheltering in his brother's house in the centre of Gaza.

"Enough is enough," he said, explaining how he had moved his family from north Gaza to the centre of the city two weeks ago to escape Israeli bombardments in his neighbourhood.

"Our ears were about to blow up from the continued bombings. We are even lucky to be alive still," he said.

Despite stepped-up diplomacy and signs a ceasefire could soon be declared, Israel has sustained its three-week-old air, tank and artillery assault, seeking to deal a definitive blow to Hamas and its rockets before any truce takes hold.

In the face of the onslaught, which Palestinian doctors say has killed 1,200 Palestinians, including 410 children, Hamas has continued to fire rockets into Israel, albeit fewer than before, with seven launched on Saturday, according to the Israeli army.

Thirteen Israelis have been killed in the conflict, 10 soldiers and three civilians hit by rocket fire.

With several relatives killed, and little sign Hamas's missiles were having a deep impact on Israel, Hassan suggested it was time for Israel to take the initiative and cease fire.

"A unilateral ceasefire from the side of Israel would be a blow to Hamas, a political defeat," he said.

"Israel could claim they entered the heart of Gaza, destroyed the places, killed Seyyam and can come again any time," he said, referring to Hamas security chief Saeed Seyyam, who died in an Israeli air strike on Thursday.

Others, though, were not convinced, saying Hamas should instead try to strike an open-ended ceasefire with Israel.

"That way they can claim it is not permanent and can break it once they have the ability to," said Aziz, a taxi driver.

"Hamas has made a point. Hamas has not been broken, they are continuing to fire rockets when they want and where they want. But they need to think wisely of the gains and the losses."

QUESTIONING HAMAS TACTICS

The gains and losses of Hamas's policy are a major point of discussion among Gazans, many of whom instinctively support Palestinian resistance against Israel, but question the cost in lives and destruction of the past three weeks.

"Rockets must end. What did we gain from them?" said Lama, a secretary for a Gaza company, who would not give her full name.

"Now Hamas is negotiating a truce. They were given an offer to renew it in December but they refused. Now after thousands of casualties, how does Hamas explain that?" she asked.

Hamas has fired around 8,000 rockets and mortars into Israel since 2001, killing 21 people and causing widespread disruption in southern towns. Israel has said stopping rockets is the chief objective of its offensive.

For Hamas, the ability to fire rockets up to 40 km (24 miles) into Israel was a progression in tactics from the suicide attacks that were a hallmark of the early part of the second intifada (uprising) against Israel that began in 2000.

But given the amount of death and destruction Israel has wrought on Hamas and Gaza as a result of the rockets, even those who initially backed the tactic are now questioning it.

"I have always been a supporter of rockets and all forms of resistance," said Aziz, the taxi driver. "But maybe Hamas needs to renew martyrdom operations instead," he said, referring to suicide attacks.

Hassan, the father of five, said there was little point in firing rockets if they were not effective.

"Rockets -- I think this issue needs to be stopped for sometime and restudied," he said. "Once we have a missile that can reach the heart of Tel Aviv and blow up a building, maybe they can resume fire." (Editing by Luke Baker and Alistair Lyon)