Thousands attended Israeli funerals on Thursday for two slain soldiers returned in a prisoner swap with Hezbollah and their grief contrasted with Lebanon's joy over guerrillas freed in the deal.

Defence Minister Ehud Barak told the soldiers and civilians gathered at the graveside of Ehud Goldwasser, 31, that Israel was "heartbroken" and had "paid a heavy price" to bring home the bodies by freeing five guerrillas involved in deadly attacks.

He vowed at a funeral held in the northern Israeli town of Nahariya that Israel would make every effort to retrieve other captive soldiers, including Gilad Shalit, who was abducted by militants from the Gaza Strip in a 2006 cross-border raid.

A funeral for Eldad Regev, a second Israeli soldier whose remains were also returned in a black coffin as part of the deal on Wednesday, was under way in the northern city of Haifa.

The funerals were broadcast live on national television and Israelis watched as Goldwasser's widow wept at his grave. The two men were captured in a cross-border Hezbollah raid that sparked a 2006 war.

The Shi'ite group had not commented on the soldiers' condition since capturing them in the war in which some 1,200 Lebanese and 159 Israelis were killed, fuelling hopes that they may have survived.

"I just can't believe it. Udi, we thought it would be otherwise, we hoped you would return home," Daniella Avni, Goldwasser's mother-in-law said before his burial.

BITTERNESS

News headlines reflected a bitterness over the contrast between Israel's mourning and the celebratory fireworks and ceremonies held in Lebanon to welcome the former prisoners and remains of 197 guerrillas Israel returned under the deal.

Hezbollah leader Sayed Hassan Nasrallah made a rare public appearance to welcome the prisoners on Wednesday and further celebrations were held on Thursday as the guerrillas' remains were taken by convoy from southern Lebanon to Beirut.

"A more undignified and morally offensive spectacle is hard to imagine," English-language newspaper the Jerusalem Post wrote in an editorial.

Israeli Prime Minister Ehud Olmert on Wednesday singled out for criticism the honours in Beirut that went to Samir Qantar, reviled in Israel for a 1979 attack that killed four.

"Woe betide the people who celebrate the release of a beastly man who bludgeoned the skull of a 4-year-old toddler," Olmert said in a statement, referring to the girl Qantar killed with her father.

Qantar has said Israeli soldiers shot the father when confronting the guerrilla squad. He was also wounded, and has said he did not know what happened to the girl because he lost consciousness.

The Yedioth Ahronoth newspaper, quoting a senior Israeli source, said Israel now regarded Qantar as "worthy of death."

"Israel will find him and kill him," the source said.

Some Israeli commentators renewed criticism of the 2006 war.

"What a tragic end," correspondent Amir Rappaport wrote in the Maariv daily newspaper. "A lesson has been learned: Battles with the enemy should be waged through negotiation."