Four exhausted children have been discovered cowering in a house next to the bodies of their mothers by staff of the International Committee of the Red Cross, which yesterday accused the Israeli military of "unacceptable" delays in allowing medics safe access to injured Gazans.

The Red Cross workers found the children, who were so weak they could not stand, sheltering next to the bodies of their mothers in a house in Zeitoun, southeast of Gaza City. Another man was found alive, but again too weak to stand. At least 12 corpses were lying on mattresses.

In another house nearby they found 15 survivors, several of whom were wounded. There were three more bodies in a third house. On Wednesday, a Palestinian volunteer with the Red Crescent who was in the same convoy described seeing dozens of dead bodies. Among those killed on Monday when the houses were shelled were three boys, all from the Samouni family.

The Red Cross said Israeli soldiers were posted 80 metres away and had several positions nearby, including two tanks.

It was a shocking incident, said Pierre Wettach, head of the Red Cross delegation for Israel and the Palestinian territories. "The Israeli military must have been aware of the situation, but did not assist the wounded. Neither did they make it possible for us or the Palestine Red Crescent to assist the wounded."

The Red Cross had been asking the Israeli military to allow them access to Zeitoun since Israel's ground invasion began on Saturday, but only a three-hour lull in the fighting on Wednesday allowed them to make the dangerous journey.

The Red Cross said Israel had breached international humanitarian law by not allowing access to the wounded and said it "considers the delay in allowing rescue services access unacceptable".

The criticism of Israel's operation came as the UN, which gives food and aid to about 750,000 Gazans, said it was suspending all its aid work in the Gaza Strip after its staff and compounds came under attack by the Israeli military.

Two drivers in a clearly marked UN convoy were killed yesterday by an Israeli tank shell. The Israeli military has attacked two UN schools, killing more than 46 Palestinians sheltering inside. Another 35 bodies were pulled from the rubble in areas across Gaza City yesterday during another three-hour lull in the fighting.

The Palestinian death toll after nearly two weeks of the Israeli bombing offensive now stands at about 750, with about 3,000 injured, and the figure is rising rapidly as more buried bodies are uncovered.

John Ging, Unrwa's director of operations in Gaza, said the decision to suspend activities was "heartbreaking. This is a very very difficult decision for us to make as the population here really needs our help." He said the accumulation of incidents meant the UN had "lost confidence in the mechanism that's there. We are perfectly prepared to take the reasonable risks in this conflict zone, but something has to change. The verbal assurances have run out in terms of credibility."

Three Israeli soldiers were killed yesterday, bringing the death toll on the Israeli side to 13, three of whom were civilians.

As the conflict deepened, striking evidence from Red Cross medics and from Palestinian witnesses revealed that one of the worst incidents of civilian killings happened in Zeitoun.

The area had been surrounded by large earth walls dug by Israeli troops, making it impossible to bring in ambulances. Medics on Wednesday took out 18 wounded and 12 others who were exhausted on the back of a donkey cart. More wounded are believed to be still sheltering in houses nearby.

Under international humanitarian law both the Israeli military and Palestinian armed groups must do everything possible to search for, collect and evacuate the wounded, the Red Cross said. Attacks on medical staff, hospitals and vehicles are prohibited. But more than 20 medical staff have already been killed in Gaza by the Israeli military.

In a written response the Israeli military did not address the detailed criticisms but said Hamas, the Islamist movement that controls Gaza, "deliberately used Palestinian civilians as human shields".

It said it would investigate any serious allegations about the military's conduct.

Israeli air strikes destroyed several houses in the town of Rafah, on Gaza's southern border, after leaflets were dropped warning residents to leave the area, which said: "Hamas uses your houses to hide and smuggle military weapons." Around 5,000 Palestinians fled their homes and took refuge in two UN schools that had been set up as shelters.

As the fighting continued yesterday, there seemed little willingness on the Israeli side to halt its military operation. Ehud Olmert, the prime minister, travelled to the military's Gaza division headquarters and said there was still more fighting to come. He said the bottom line was for quiet to prevail in southern Israel. "To this we have not yet arrived and the IDF has not yet been asked to carry out everything necessary in order to do so; the decision is still before us," he said.

For the first time in the conflict, the violence took in northern Israel. Four rockets were fired from southern Lebanon into the town of Nahariya, injuring two people at a nursing home. A small Palestinian faction was believed to be behind the attack, but it did not appear to herald a regional escalation of the conflict.

In brief

• Four children found in weak state next to the bodies of their mothers and other corpses in house in Zeitoun

• UN suspends all aid work in Gaza after two of its drivers in clearly marked convoy are shot dead

• 35 bodies pulled from rubble in several areas across Gaza City during pause in fighting

• Palestinian death toll now close to 750, with about 3,000 injured

• Red Cross says delays in allowing rescue services access to dead and wounded are unacceptable

• One Israeli soldier killed yesterday, bringing Israeli casualties to 11, including three civilians

• Israeli air strikes destroy houses in Rafah, causing 5,000 Palestinians to flee their homes

• Four rockets fired from southern Lebanon into Israel, believed to be the actions of a Palestinian faction