BELGRADE, Yugoslavia (AP) - As a top U.S. negotiator failed to persuade Yugoslavia's president to sign onto a new Kosovo peace deal yesterday, Yugoslav forces backed by tanks torched the homes of ethnic Albanians along the border and sent hundreds fleeing.

Three bodies - at least two of them men who had been shot in the back in Ivaja, a hamlet near the Macedonia border where homes had been burned- were found. Residents said neither was a rebel in the separatist Kosovo Liberation Army.

A neighbor said one of the victims had called on a mobile phone to say that Serbian police were coming into the village and that residents were going to make a run for it.

Fighting on the day that Yugoslav President Slobodan Milosevic met with U.S. peace envoy Richard Holbrooke also broke out near Vucitrn, 18 miles from Pristina, the provincial capital of Kosovo. Reporters at the scene said government forces were backed by 10 tanks and two armored personnel carriers.

Holbrooke pressed Milosevic to accept a peace plan or risk NATO strikes during more than four hours of face-to-face meetings yesterday but instead the hard-line Yugoslav leader declared afterward: "Foreign troops have no business in our country."

Milosevic said the U.S.-sponsored peace plan is "a good basis" for a political settlement of the Kosovo crisis. But he continued to reject the key provision - the deployment of NATO troops to police it.

He believes stationing NATO forces is tantamount to Western intervention in Yugoslavia, made up of Serbia and the much-smaller Montenegro. Kosovo is a Serbian province, but 90 percent of its 2 million people are ethnic Albanian.

The U.S-sponsored deal calls for wide autonomy for Kosovo Albanians but not the independence that they seek and for 28,000 NATO troops - including 4,000 Americans - to police a settlement.

Holbrooke had been instrumental in forging a Bosnia peace deal with Milosevic in 1995 and a shaky cease-fire in Kosovo last October that has unraveled with new fighting this year.

But this plan was even in trouble with Kosovo Albanians, who were apparently backsliding on their pledge to sign the deal. A KLA representative in London, Pleurat Sejdiu, said the rebels would "not sign up while the war is going on in Kosovo."

The plan also requires the rebels to disarm, a serious obstacle for the secessionist-minded guerrillas.

In London, another senior U.S. official said Kosovo is a major challenge to the willingness of NATO, Russia and other former communist states to work together.

"Kosovo is a moment of testing for the alliance and partners alike," U.S. Deputy Secretary of State Strobe Talbott said at the end of a three-day conference marking the 50th anniversary of NATO.

With the Kosovo talks resuming Monday in Paris, diplomatic efforts for an agreement intensified. Foreign Minister Igor Ivanov of Russia, a Serbian ally, was expected today in Belgrade.

Reflecting the difficulties following the first round of talks in Rambouillet, France, an ethnic Albanian official who is part of the negotiating team said his delegation would return to France only to sign the agreement - not negotiate.

"The agreement reached in Rambouillet can only have technical changes," Fehmi Agani said. "It is unacceptable to start negotiations all over again in Paris, as the Serb side insists."

As Holbrooke pushed for agreement in the Yugoslav capital, army troops and Serbian police pressed an offensive to establish control of an area along Kosovo's southern border with Macedonia.

The U.N. refugee agency said it had reports of at least four villages burning in the hills and hundreds of ethnic Albanians fleeing the border area - 4,000 over the past week. Kosovo's international monitors said a Serbian policeman was wounded in a shooting near the Malisevo-Lapusnik road.

More than 2,000 people have died and 300,000 have been displaced in a year of fighting between Yugoslav troops and ethnic Albanian rebels in Kosovo.

Aid workers delivered relief supplies and were trying to evacuate residents of Kotlina and two other border villages who were afraid to flee because of the presence of Serbian tanks and armored personnel carriers.

"The situation is essentially deteriorating rather than improving ahead of the resumption of peace talks," U.N. refugee spokesman Kris Janowski said in Geneva.