FALLUJAH, Iraq -- U.S. warplanes strafed gunmen in Fallujah on Wednesday, and more than 100 guerrillas with rocket-propelled grenades pounded a lone Marine armored vehicle lost in the streets -- a sign of heavy battles ahead if Marines resume a full assault on this besieged city.
With a truce crumbling and President Bush calling for a key U.N. role to keep the country's political transition moving amid the violence, a top U.N. envoy proposed an Iraqi caretaker government in a formula that abandons a U.S.-favored plan.
With 22 foreigners currently held captive and at least 87 U.S. troops killed halfway into April, the unprecedented violence has largely eclipsed the political process. Negotiations were being held on both fronts -- at Fallujah in central Iraq and at Najaf in the south -- but the U.S. military has warned it will launch new assaults if talks do not bear fruit.
In the south, the country's top cleric, Grand Ayatollah Ali al-Husseini al-Sistani, persuaded radical cleric Muqtada al-Sadr to drop defiant negotiating demands -- including that U.S. troops withdraw from all Iraqi cities. An Iranian envoy was also getting involved in the mediation with al-Sadr, an aide to the cleric said.
The U.N. envoy, Lakhdar Brahimi, said respected Iraqis should lead a caretaker government -- with a prime minister, president and two vice presidents to run the country after the handover of power by the Americans on June 30 and until national elections in January. He did not say who would select them.
Under the Brahimi plan, the U.S.-picked Iraqi Governing Council would be dissolved June 30, rather than expanded to form an assembly as called for in an earlier proposal U.S. administrators promoted.
However, the formula would also give Washington a way to dissolve the fractious and unpopular 25-member council.
The White House thanked Brahimi for his plan, but it wasn't clear whether U.S. officials would embrace it.
"We appreciated the United Nations' help in moving forward on our strategy to transfer sovereignty to the Iraqi people by June 30," said White House press secretary Scott McClellan.
Brahimi also criticized the U.S. military operation in Fallujah.
"Collective punishment is certainly unacceptable and the siege of the city is absolutely unacceptable," he said.
In Fallujah, Marines and insurgents were fortifying their positions in preparation for more fighting.
In abandoned homes a few blocks into the city, Marines punched bricks out of walls to make holes through which to fire, and knocked down walls between rooftop terraces to allow movement from house to house without descending to the street. They spread shards of glass across doorsteps to hear the boot of an approaching insurgent.
Insurgents were also organizing. Gunmen were believed to be digging tunnels under the houses they hold to allow them to move without being targeted by Marine snipers, Marines said.
A 4-day-old truce was crumbling amid nightly battles in which gunmen in larger groups have been attacking U.S. troops with increasing sophistication. Wednesday night the fighting began again, with AC-130 gunships over the city battering targets below.
The top Marine commander in the Fallujah area suggested time for negotiations was running out before U.S. forces call off their halt in offensive operations.
"I don't forecast that this stalemate will go on for long," said Maj. Gen. James N. Mattis, commander of the 1st Marine Division. "It's hard to have a cease-fire when they maneuver against us, they fire at us."
Tuesday night, insurgents launched near simultaneous attacks on several positions of a company of Marines controlling a few blocks in the city's northeast. In one attack, the gunmen sent up flares to light up the American position, then unleashed heavy, continuous gunfire, Marines said.
In a five-hour battle the same night, one of two armored vehicles sent to resupply a front-line Marine position got lost during an ambush and ended up nearly half a mile inside the southern part of city.
The vehicle, with 20 Marines inside, came under an even larger ambush. At least 100 gunmen opened fire with rocket-propelled grenades, hitting it at least 10 times, knocking out its communications and its engine and paralyzing it.
"They've been preparing for this the whole time. ... We definitely stumbled into the wasp nest," said Captain Jason Smith, who was at the position meant to be resupplied.
The Marines in the armored vehicle fled into a nearby building, where they waited to be rescued. They threw back grenades that insurgents tossed over the wall and listened to gunmen whisper outside.
A rescue force, backed by four tanks, wandered the streets in search of the beleaguered vehicle, finding it by following black smoke. "We were firing in a 360-degree radius," said Lt. Joshua Glover, part of the team that reached the vehicle. While F-15 warplanes strafed the area for cover, the stricken armored vehicle was hooked to a tank and dragged away.
Elsewhere in the city, gunmen wore police flak jackets looted from Iraqi police stores.
"We fought for every one of these streets," Col. B.P. McCoy, 41, commander of the 3rd Battalion, 4th Marine Regiment said during a dangerous, zigzagging trot through a northern neighborhood to inspect Marine positions. The streets were empty. A few scorched cars littered roads.
To help combat the surge in bloodshed, about 21,000 American soldiers in Iraq who were to return this month to their home bases in Louisiana and Germany will have their tours extended at least three months, U.S. defense officials said Wednesday.
Meanwhile, U.S. officials and the top U.S contractor in Iraq, Halliburton, were trying to determine whether four bodies found belonged to seven Americans missing since gunmen attacked their convoy outside Baghdad on Friday.
State Department spokesman Richard Boucher declined comment on reports that the bodies were mutilated.
A kidnapped French journalist was freed in Iraq, but there were reports that two Japanese were abducted -- in addition to three Japanese already held captive by gunmen threatening to kill them.
The four Italian security guards, who worked for a U.S. company in Iraq, were abducted Monday.
Al-Jazeera reported it had video of the killing but did not broadcast it because it is too graphic. The station did show footage of the four hostages sitting on the ground, holding up their passports and surrounded by armed men.
The militants' videotape was accompanied by a statement from a previously unknown group calling itself the Green Battalion, which threatened to "kill the three remaining Italian hostages one after the other, if their demands are not met," Al-Jazeera said.
The group also demanded an apology from Prime Minister Silvio Berlusconi and the release of religious clerics held in Iraq. Italy is the third-largest coalition partner in the occupation force.
Associated Press correspondent Denis D. Gray contributed to this report from Najaf.