Using jet fighters, tank-buster aircraft and patrol boats, the U.S. military launched a massive operation to crush opposition north of Baghdad and captured nearly 400 suspected Saddam Hussein loyalists in a bid to end daily attacks against American soldiers.

Code-named "Operation Peninsula Strike" and involving thousands of American troops, the push began Tuesday and was centered on the town on the Tigris River (search) town of Thuluya 45 miles north of Baghdad, the Central Command (search) said.

While the command did not mention Saddam, a leader of an Iraqi exile group said in New York Tuesday that the ousted leader was seen north of Baghdad as recently as three weeks ago.

Ahmed Chalabi, head of the Iraqi National Congress, also claimed Saddam was paying a bounty for every American soldier killed, using $1.3 billion in cash taken from the Central Bank on March 18.

Thuluya is located not far from the main road between Baghdad (search) and Tikrit (search), the home town of Saddam and likely place of refuge for Saddam die-hard fighters. The war left Thuluya, bristling with date-palms, largely untouched.

In Washington, Pentagon officials said Tuesday they had no information that Saddam was alive and offering bounties for killing U.S. troops.

In the first stage of "Peninsula Strike," soldiers moved into attack and reconnaissance positions, while seeking help from local police, the command said.

The troops from Task Force "Ironhorse" then began air, land and water-based raids to block escape routes.

By Wednesday, 397 suspects were in custody near the town of Balad, 37 miles north of Baghdad, and a large number of arms and ammunition had been seized, the U.S. military said. A curfew was then imposed from 10 p.m. until 4 a.m.

"A variety of units are incorporated into the operation, using the overwhelming firepower," the command said. Armor, artillery, aviation, and engineers, along with Air Force elements "continue to work together to accomplish the mission," it said.

In a separate operation, two Iraqi men armed with Kalashnikovs attacked a U.S. position north of the town of Khaldiyah, 45 miles west of Baghdad, said Maj. Justin Rideout of the 3rd Infantry Division.

He said one Iraqi was killed and two U.S. soldiers were wounded when their automatic grenade launcher malfunctioned.

The main fighting in the U.S.-led war that toppled Saddam is over, but dozens of soldiers and Iraqis have been killed or wounded in skirmishes that break out almost daily. Ten Americans soldiers have been killed in the last 15 days.

The attacks have hampered efforts to restore security and begin the massive task of rebuilding Iraq after 10 years of U.N.-imposed sanctions.

In the latest American death, assailants fired rocket-propelled grenades at a weapons collection checkpoint outside Baghdad, killing a paratrooper and wounding another, the U.S. military said Wednesday.

The soldiers from the 82nd Airborne Division's 2nd Brigade were manning the position in Baghdad's southwestern suburbs when a van pulled up about 250 yards away and men jumped out.

They fired two RPG rounds at the squad and then fled down the alleyway, according to a statement from Central Command.

On Tuesday, the military said a total of 205 coalition troops had died since the beginning of the U.S.-led invasion of Iraq.

Of those, 135 were killed in hostile activities and 70 in friendly fire incidents or other accidents. A total of 627 service members were injured since the beginning of Operation Iraqi Freedom on March 20, the military said.