The residents of the Garvaghy Road in Portadown could win a package of economic investment in return for movement on the contentious parades issue under a deal discussed at proximity talks between the residents and the Orange Order.
The British government is actively considering measures designed to redress what the residents say is a serious imbalance between the living standards of Catholics and Protestants in Portadown.
Meanwhile, republicans are being blamed for killing a 33-yearold man who bled to death after a punishment attack in north Belfast early yesterday. Mr Andy Kearney was taken from a flat in the New Lodge area shortly after midnight by five men and shot in both knees.
It is believed the victim, a father of four young daughters, was involved in a fight in a west Belfast bar some weeks ago when a prominent republican was beaten up. He had received threats over the past year, one in the name of Direct Action Against Drugs, widely regarded to be a cover name for the IRA.
The police said Mr Kearney was "totally innocent" and had no links to drug-dealing or paramilitaries. They believed republican paramilitaries carried out the shooting.
His family said yesterday he was killed because of a personal vendetta by republican elements. Mrs Maureen Kearney said she believed her son was killed by "people who claim to be Provos". She said she had gone to senior Sinn Fein and IRA people in the past over the threats, and they had denied any involvement.
Mr Kearney was with his girlfriend and two-week-old daughter when his attackers burst into the flat. He was taken into a lift and shot three times. The gunmen ripped the phone from the wall before leaving. Supt Roger Maxwell of the RUC said "valuable minutes were wasted" because Mr Kearney's girlfriend had to go to a friend's house in a nearby tower block to call an ambulance. An artery in his leg was severed in the attack and he had lost too much blood by the time he was taken to hospital.
It was confirmed yesterday that three Orange Order chaplains have resigned in protest at the organisation's handling of the Drumcree standoff, and more resignations may follow.
The Rev Robert Boyd, County Grand Chaplain of Tyrone, said several of his colleagues had resigned, and more were thinking of doing so.
"I have spoken to several chaplains and some have already resigned, some have been reassured by the statement we issued and there are some who are seriously thinking about it. People will be thinking long and hard," he told BBC radio.
The proximity talks, which broke up after 10 hours on Saturday, are expected to reconvene tomorrow.
In Portadown, the RUC yesterday removed many of the barriers which it had erected before the Drumcree standoff. A spokesman said the move was planned as a first step towards returning the town to normality. A strong security presence would be maintained, he said.
Both the Northern Ireland Office and residents' representatives said some progress had been made at the talks, which are chaired by Tony Blair's chief of staff, Mr Jonathan Powell.
The Bloody Sunday Inquiry will open today in Derry amid arguments over legal representation for the families of those killed by British paratroopers in the city on January 30th, 1972. The preliminary hearing is expected to last for up to three days.