U.S. officials described the insurgents as a mix of Saddam Hussein loyalists and foreign Islamic fighters. Coalition authorities said the recent bloodshed would not deter the Bush administration from transferring power to an independent Iraqi government on June 30.
The White House announced that President Bush would hold a news conference today to update Americans on the situation in Iraq. Bush met with Egyptian President Hosni Mubarak on Monday and discussed the surge of violence in Iraq. Afterward, Bush said conditions in Iraq were improving, while Mubarak expressed "serious concerns about the current state of affairs."
In Baghdad, Dan Senor, the top spokesman for the U.S. civilian authority, underscored the intention to hand over power to the Iraqis on time.
"The way we look at it is, there's no alternative to getting it done," he said, charging that Al Qaeda operatives were attempting to spark a civil war in Iraq between Sunnis and Shiites. "If we allow the violence to cause setbacks to the political process, the terrorists and the extremists will have scored an enormous victory."
Negotiators said it appeared the truce in Fallouja would enter a third day. "It's a cease-fire. It's pretty quiet," said Saif Rahman, an Iraqi Islamic Party official involved in the discussions.
About 700 Iraqis are believed to have died in the Fallouja fighting, but Kimmitt said a full accounting of Fallouja's casualties had not been determined. He said it would take an investigation by the nation's Health Ministry to "get a fair, honest and credible figure."
There was no word Monday on the fate of a number of hostages, including Thomas Hamill, a truck driver for KBR who was kidnapped during an ambush over the weekend. Hamill is a former dairy farmer who signed on for work in Baghdad to cover family medical bills.
The Japanese government was attempting to negotiate the release of three of its citizens kidnapped last week, and China's state-controlled news agency reported that seven Chinese citizens had been released by their captors.
The U.S. identified the two missing U.S. soldiers as Sgt. Elmer C. Krause, 40, of Greensboro, N.C., and Pfc. Keith M. Maupin, 20, of Batavia, Ohio. They disappeared Friday after their convoy came under attack; both are assigned to the Army Reserve's 724th Transportation Co., Bartonville, Ill.
Near Najaf, hundreds of U.S. troops began moving into the region, including a Stryker Brigade from Mosul and battalions from Kirkuk and Baqubah.
Convoys carrying troops, tanks, construction equipment and supplies snaked south, setting up a huge encampment in an abandoned Iraqi army munitions dump in the desert about 12 miles outside of Najaf.
To escape attack or detection, the convoys often used back roads. Other convoys traveled the same route to Najaf that hundreds of thousands of Shiite pilgrims used recently to reach the city for the Arbain holiday. After their arrival, U.S. troops began setting up for the long term, preparing to build housing facilities, infrastructure and a detention facility.
The move, coming as Sadr appeared to be entering serious discussions with at least two groups of Shiite negotiators, raised the stakes in the standoff.
Members of the U.S.-led coalition are demanding that Sadr surrender to an Iraqi court for investigation into his involvement in the slaying of Majid Khoei, a Shiite clergyman who was stabbed to death last year in Najaf, allegedly at Sadr's behest.
They are also demanding that he disband his militia, known as the Al Mahdi army, which gains its most formidable power from its ability to attract mobs of armed youths.
On Monday, Sadr for the first time took steps to withdraw some of his militia from government offices it took over last week, according to witnesses in Najaf.
The move was a good-faith gesture, said negotiators who were working with Shiite clergy and members of the Iraqi Governing Council. Installing his militia in key government offices in southern cities helped spark last week's fighting in the south.
However, it wasn't clear whether Sadr intended to pull back. Large numbers of his militia members flocked to central Najaf armed with grenades and rockets. A witness said that one even set up a missile launcher.
The stationing of large numbers of U.S soldiers near the holy city could cause a backlash from Sadr supporters and more moderate Shiites, who view Western troops in the vicinity of their holy shrine as an affront. That could lead to violence not just in Najaf but also in Baghdad, which is home to 1 million to 2 million Shiites. Coupled with that is the possibility that young, poor, urban Shiites loyal to Sadr would throng to Najaf to defend him.
W. Andrew Terrill, an expert on Shiites at the Army War College in Carlisle, Pa., said putting Sadr under arrest would probably create some public protest but would be manageable. The challenge is capturing him, Terrill said.