JERUSALEM - A two-minute video of an Israeli soldier held captive by the Palestinian Islamist group Hamas for the past three years shows him healthy and coherent and speaking to the camera, Israeli officials said on Friday.

In the classic proof of life gesture, Gilad Shalit was shown holding an Arabic-language newspaper dated September 14, said one official who saw the video.

He read from a text, telling of his condition and asking for his release. He was shaved and his hair was short. He was wearing glasses and dressed in what appeared to be military uniform, said the official.

The recorded images of Shalit, 23, were handed over in exchange for Israel's release of 20 Palestinian women from its jails, one of whom brought home a 20-month-old boy born in prison to a joyful reception in the Islamist-run Gaza Strip.

The swap with Hamas, brokered by German and Egyptian diplomacy, could be a step toward a larger prisoner release and eventual freedom for Shalit, top priorities for Israel and Hamas since his capture in a June 2006 cross-border raid.

I hope this is going to be a step on the way to freeing our men and women prisoners from occupation jails, said Hamas prime minister in Gaza, Ismail Haniyeh.

I hope it will be step toward Palestinian reconciliation and national unity. I see the Palestinian people today united behind this step, he told a crowd welcoming home Fatim al-Zaq who was pregnant when arrested and gave birth in jail.

Israel had said Friday's deal was a confidence-building gesture before crucial stages in negotiations for Shalit's release, and added that lengthy and difficult negotiations were still ahead before any final swap.

Israeli officials said the video of Shalit was authenticated before 19 of the women were released. Prime Minister Benjamin Netanyahu and Shalit's parents saw copies but there were no statements and no immediate decision to make it public.

The video was handed over as a convoy of Red Cross jeeps carried 18 freed women prisoners over the Beitunya checkpoint into the West Bank while al-Zaq went to Gaza with her baby. The final prisoner in the swap was due to be released on Sunday.

BABY GETS ECSTATIC WELCOME

In both the West Bank and Gaza, the first stop for the liberated women was government headquarters, where official receptions and celebrations were held and speakers demanded the release of hundreds of long-term prisoners.

On the Gaza side of Israel's Erez Checkpoint, hundreds of Palestinians waving the green Hamas flag, the black banners of Islamic Jihad and the Palestinian national colors joined a convoy into the Mediterranean coast city with sirens wailing.

Haniyeh sent his official car to pick up 40-year-old Fatima al-Zaq and son Youssef and bring them direct to his office.

The baby was snatched from her arms in a media frenzy and passed overhead into the embrace of the prime minister, who held the wailing little boy up to the ecstatic crowd and kissed him repeatedly.

The al-Zaq house was decorated with posters and flags.

We feel wonderful, said her husband Mohammed, who is a member of Islamic Jihad. People are celebrating with us, from all factions ... the prisoners' release unites us.

There was no immediate word from the Shalit family.

The International Committee of the Red Cross has not visited Shalit and only a few letters and an audio tape have reached his parents, who have waged a vocal campaign to get him freed.

Netanyahu said in a statement on Wednesday it was important for the entire world to know that Gilad Shalit is alive and well and that Hamas is responsible for his well-being and his fate.

Israel holds more than 10,000 Palestinian prisoners. Hamas is seeking the release of hundreds of members in exchange for Shalit, including militants behind deadly attacks whom Israel has said in the past it would not set free.

Israel has said none of the women freed on Friday were directly involved in killings or serving more than two years.

Shalit, who is also a French citizen, served in a tank unit. He was last seen by Israelis when Islamist militants tunneled into Israel and killed two fellow soldiers. Two attackers were also killed but the group successfully abducted Shalit.

(Additional reporting by Nidal al-Mughrabi in Gaza, Mohammed Assadi in Ramallah; editing by Douglas Hamilton and Elizabeth Fullerton)

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