Taliban leaders have been dealt damage setbacks in recent days that guarantee their government won't survive but leave it "not yet at the verge of collapse," according to sources here.

The combination of military equipment and personnel losses, evaporating official support from local tribal leaders and neighboring Pakistan, and a demoralized population have all combined to leave the Taliban reeling but not out of options, according to officials and experts along both sides of the Pakistani-Afghan border.

"It's become clear in this last week that they cannot survive and must find another way out of this situation," a Pakistani source said. "Things are moving very, very quickly, though I suspect they are not as badly off as some reports suggest."

The Taliban's increasingly precarious military situation is the most obvious of their problems. U.S. attacks have killed unknown numbers of troops and, perhaps more importantly, destroyed much of Afghanistan military hardware, blowing up everything from fighter aircraft to troop transports.

Several aid agencies have reported Taliban troops are systematically resorting to theft and burglary in an attempt to replace much of their lost material. Several aid offices have been broken into or seized by Taliban troops, with the most recent attack coming on Thursday.

Others here said a more specific military threat centers on the intense fighting around Mazar-I-Sharif between the Taliban and Northern Alliance forces. A rebel victory there could effectively split Taliban forces around the country in half, on either side of a key north-south supply road.

"This could be the battle for all of Western Afghanistan, and we have an interest in which way it goes," said an official with a NATO country who asked not be named.

There are also signs U.S. bombs are just starting to find their human targets. Reports on Thursday said a key Al Qaeda operative had been killed in the U.S. bombing campaign, apparently becoming the first high-ranking casualty in the group.

Abu Baseer al-Masri, a member of the Egyptian Gamaa al-Islamiya and bin Laden confidante, was killed in raids earlier this week, according to the Islamic Observation Center, a London-based group that often disseminates information on behalf of Muslim extremist groups. Al-Masri has lived in Afghanistan for years and spent much of his time in the Al Qaeda training camps.

Taliban officials insist their entire government leadership structure has survived the bombing. And while there are no substantive reports that high-ranking government officials have been killed, there are many reports the bombing has split the ranks of pro- and anti-bin Laden officials.

Foreign Minister Wakeel Ahmad Mutawakil, said to be among bin Laden's biggest opponents, came to Pakistan earlier this week in a secret negotiating session that may or may not have been approved by Taliban leaders. Pakistani sources said Mutawakil and Pakistani officials discussed an Afghan government structure that did not include Mullah Mohammed Omar, the Taliban leader and protector of bin Laden.

"Reports that he defected were a bit overstated, but there's no question he represents a group looking for a way out of this," said a Pakistani source.

There's no indication yet the moderates are winning the debate. Mutawakil is said to be opposed in his efforts by a group of powerful hardliners that include Justice Minister Mulla Noorunddin Turabi, Intelligence Chief Qari Hamdullah and Defense Minister Mulla Ubaidullah, a trio unlikely to be easily displaced.

The Taliban also face the possible loss of considerable spiritual and material support from many of Pakistan's tribal leaders, who control much of the Pakistani border areas along the Afghan frontiers. U.S. and Pakistani officials are said to be working the area in an effort to win over the tribal leaders.

That campaign may be paying off. A Pakistani newspaper on Friday reported a "significant breakthrough" had been made in talks between government officials and one of the Taliban's most important tribal supporters, who was not named by the newspaper. The tribal official reportedly agreed to pull back support for the Taliban within Pakistan, effectively cutting off an important supply of goods and recruits.

The U.S.-led alliance is openly encouraging a split among Taliban leaders and their natural allies, and for the first time this week talked about reaching out to moderate Taliban officials. The latest sign came on Thursday, from a visiting British official who said a new government could include some Taliban elements.

"I have been told that there are many moderates within the Taliban who could be associated with the future broad-based government in Afghanistan," said Claire Short, Britain’s secretary of state for international development.

"The future government in Afghanistan will not be dominated by the Northern Alliance," she said, a statement clearly aimed at placating both moderate Taliban elements and ethnic Pashtun tribal leaders who fear the new government will be dominated by Tajik- and Uzbek-led groups.

Finally, reports of "massive defections" among Taliban troops are apparently dragging down morale on the front lines, some believe. Two sources in Northern Afghanistan said they could find only scattered instances of "small groups" of Taliban soldiers crossing over to the Northern Alliance, but there were pervasive rumors of many more.

"No way there are as many defections as the Northern Alliance claims. It's not even close," said one observer who has been in Northern Afghanistan for the last three weeks. "The Taliban may have a lot of problems, but getting people to fight for them isn't at the top of the list."