FALLUJAH, Iraq (AFP) - US warplanes struck suspected hideouts of Islamic militant Abu Mussab al-Zarqawi in rebel-held Fallujah, while Britain assessed a US request to send troops to more dangerous areas.
The Iraqi national government issued plans for a nationwide cash-for-arms plan to try to put down the insurgency, but violence continued, with two Iraqis killed as gunmen and US soldiers traded fire in a town north of Baghdad.
Amid a rising tide of extremism, a group calling itself the Islamic Army in Iraq has said it had executed two Macedonian men it accused of spying for US forces, Al-Jazeera television reported.
US warplanes struck one of the breeding grounds for radical Islam early Tuesday with 90 minutes of air strikes on suspected safe houses and weapons depots thought to belong to Zarqawi in southern Fallujah, the military said.
The strikes have been a regular occurrence since June as US and Iraqi forces seek to subdue the city in the Sunni Muslim heartland ahead of January elections.
The military statement made no reference to any possible casualties.
US and Iraqi forces believe that Fallujah, west of Baghdad, has been transformed into the main base for the Jordanian-born Zarqawi and his followers, who are blamed for a slew of car bombings and kidnappings across Iraq.
Desperate to regain control of the no-go zone, more than 1,000 joint forces have encircled the city for the past five days, though they have given no indication about whether a ground assault would be launched.
The military said its air strikes had significantly altered the structure of Zarqawi's groups by killing off key figures.
The latest assault deflated hopes for a peaceful solution to the crisis after a city leader, Sheikh Khaled Hamoud, was released by the military after being detained since Friday.
Fellow negotiator Sheikh Abdul Hamid Jadu described the release of Hamoud as a positive step and expressed his wish to restart talks with the Iraqi government that had broken off Thursday.
"If the US bombing stops, that would be another positive indication and the negotiating channels could be reopened," Jadu said. "From the beginning we have been calling for a peaceful solution."
The delegation team stormed out of peace talks after Iraqi Prime Minister Iyad Allawi issued them an ultimatum to hand over Zarqawi, who they deny is in the city. The same day, intense air strikes hammered Fallujah.
Seeking compromise, Allawi announced in a speech to parliament on Monday that his government would send aid worth two million dollars to the city and the International Committee of the Red Cross said it had sent 1.5 tonnes of urgent medical and surgical equipment to a hospital there.
Allawi also offered a sweetener to the rest of the nation with the announcement of countrywide the weapons buyback program, begun last week in a Baghdad slum.
The program would first be expanded to Basra, Iraq's second-largest city, Allawi told parliament.
The weapons-for-cash scheme to disarm the militia of radical Shiite cleric Moqtada al-Sadr in Sadr City was so successful it has been extended until Thursday, Allawi said.
With US forces concentrating on Fallujah, British Defense Secretary Geoff Hoon said the government was considering whether to redeploy British troops from southern Iraq to the more violent central areas currently patrolled by US troops.
Foreign Secretary Jack Straw said Tuesday that Britain was likely to agree to the request and will only refuse if British generals advise otherwise.
"Geoff Hoon indicated that our thinking is obviously moving towards saying yes," Straw told the BBC. "But it depends on the advice we receive on the ground from professional soldiers."
A decision is expected mid-week.
At the Pentagon, spokesman Larry DiRita said General George Casey, the US commander of the multinational force in Iraq, was considering ways to reposition forces in Iraq and was asking coalition members how their forces might participate.
Casey's plan involves moving coalition troops into the area around Baghdad, allowing US troops there to take part in other operations.
DiRita would not say how many coalition troops Casey hopes to reposition, or whether additional US troops would be needed if he does not get them.
The US State Department meanwhile warned Iran against providing any type of support to Zarqawi, but declined to comment on allegations of an Iran-Zarqawi link.
"We have generally been very concerned about some of the reports of Iranian activity in Iraq," spokesman Richard Boucher said.
Iraq's interim national intelligence chief Mohammed al-Shahwani told AFP last week that he believed Iran, through its embassy in Baghdad, was masterminding an assassination campaign that has seen nearly 20 agents killed since the middle of last month.
On the ground, two Iraqis were killed in fighting between US troops and insurgents as the Americans carried out sweeps around the northern town of Duluiya, considered a hotbed of Islamic extremism, medical sources said.
A US military spokesman said soldiers had been sealing off neighborhoods and conducting searches for several days and had carried out detentions in the town, 75 kilometers (40 miles) north of Baghdad.
Three US soldiers were wounded in a bomb blast in Baghdad, while a US soldier was found dead in his bunk house late Monday. The military said the non-combat death was under investigation.