AP Online JERUSALEM (AP) _ Yellow stars spill across an aerial photograph of Jerusalem's Old City, beachheads in a Jewish settler group's long campaign to ``reclaim Jerusalem.'' Each of the 30 stars marks a building in the Muslim and Christian quarters taken over by the group, Ateret Cohanim, and now occupied by Jews.

Ateret Cohanim stormed back into the public eye last week when it set up seven tin sheds just inside the Muslim Quarter's walls, setting off scuffles with Palestinian legislators.

City workers demolished the unauthorized sheds, but a Jerusalem city planning commission on Wednesday heard a proposal from Ateret Cohanim to build high-rise apartments and a school there, Israel's Channel Two television reported.

Leading a tour of American supporters on Wednesday, Ateret Cohanim tour guide Bracha Slae called the Muslim Quarter ``the new up-and- coming Jewish neighborhood of Jerusalem.''

Ateret Cohanim's campaign to move Jews into Jerusalem's Arab neighborhoods threatens to push tensions in the divided city to the boiling point. Palestinian leader Faisal Husseini called this week for mass street protests, saying diplomacy alone was not enough to block Jewish settlement in Jerusalem.

Over the past 18 years, Ateret Cohanim has moved more than 65 families into 40 to 50 buildings scattered throughout the Old City' s Muslim and Christian quarters, according to Slae. Ateret Cohanim owns many more buildings it has not yet been able to move into, she said.

The group, heavily funded by Florida multimillionaire Irving Moskowitz, says its goal is to restore the Jewish presence to parts of Jerusalem where it disappeared following Arab riots in the 1920s and `30s. In the 1980s and early 1990s, Ateret Cohanim received secret funding from right-wing Israeli governments.

The idea of Jews living in Arab neighborhoods - and vice versa - seems unremarkable to an outsider. But in practice, mixed neighborhoods are virtually unheard of in Jerusalem, and any change to the character and makeup of the city's neighborhoods has been an explosive issue, with both sides fearing land grabs before Jerusalem's final status is determined in peace talks.

The Palestinians claim east Jerusalem, which Israel captured in the 1967 Mideast War, as capital of a future state. Israel insists the city must remain undivided under Israeli sovereignty.

``They don't want to be neighbors,'' Ibrahim Mohammed, a maintenance worker who lives in the Muslim Quarter, said of Ateret Cohanim. ``They want to get rid of everybody else.

``They're willing to pay huge amounts of money for any little corner, and then keep expanding until they take over the whole city.' '

Ateret Cohanim said it set up the sheds in the Muslim Quarter last week in retaliation for last month's stabbing death of a student from the group's religious seminary. Another Cohanim student was killed in November. Palestinian militants were suspected in both attacks.

After each of the deaths, Ateret Cohanim vowed to step up its campaign.

``We are making an effort to bring in massive numbers of people, '' Slae said Wednesday.

Slae insisted that Ateret Cohanim believes in coexistence, and works within the law. But because Palestinians who sell to Jews face retribution - and possibly death - at the hands of fellow Arabs, she said the group works secretly, sometimes helping sellers relocate out of the area, or agreeing to take possession of a property only after the seller dies.

``The difficulties are very great,'' Slae said. ``We get a lot of bad publicity.''

Standing on the roof of a three-story Ateret Cohanim building in the Muslim Quarter, Slae looked out over mosque minarets and church steeples and picked out the Israeli flags identifying the group's properties.

Her voice nearly drowned out by the clamor of church bells, Slae said Ateret Cohanim had a long list of young couples who want to move into the Old City, but did not yet have permission to build on the property it owns.

``What we need is pressure,'' she said. ``And money.''

HILARY APPELMAN Associated Press Writer, Jewish settler group stakes claims to Arab Jerusalem. , AP Online, 06-03-1998.