This is a partial transcript of Special Report with Brit Hume, September 26, that has been edited for clarity.

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TONY SNOW, GUEST-HOST: What's the real story in Iraq; quagmire, triumph, something in between? Here with a status report, FOX News military analyst retired Air Force Major General Tom…Lieutenant General…I'm sorry. I've got to give that star back. Tom McInerney just back from Iraq.

General, let's talk a little about the situation there. You heard Ted Kennedy (search) earlier in the broadcast saying it's a failure; we're wasting money. You've heard political critics in this country say it. You see press reports each and every day detailing the deaths of American soldier, giving the impression, anyway, that things are not going well.

Now, you've just been on a…we have got to stipulate, Pentagon sponsored an organized trip to Iraq. But you got around a fair amount. Give us first your general impression of how things are going.

RETIRED U.S. AIR FORCE LT. GEN.THOMAS MCINERNEY: Well, first of all, things are going quite well, almost very well, when one considers we've only been there five months. It does confuse the troops because they now have television over there, Tony. And when these statements by like Senator Kennedy, they're saying he's criticizing my job and they're doing a very good job.

SNOW: So, while he's talking about the sacrifices of American troops, they're saying, wait a minute; he's insulting us.

MCINERNEY: Yes. He's insulting them. He's saying the work I'm doing isn't good. And by the way, they are doing very good work. They're on their game plan. Things aren't perfect. They've got a security problem, but it's not a big problem. This is not guerrilla warfare. This is terrorism.

SNOW: It's terrorism but nevertheless terrorism, the whole point of that is to inflict fear on the part of the people.

MCINERNEY: That's correct.

SNOW: Just how widespread is the terror? And furthermore, what is the assessment, the number, the quality of the people involved? And how easy or how difficult would it be to suppress that terror?

MCINERNEY: We visited four divisions and four out of the five divisions there, and the sixth, counting the British. We didn't get down there. We missed the 82. But they get about three to five incidents a night. And there's crime; there are other things going on. The quality of the people doing these keeps getting worse and worse.

SNOW: The quality of the people committing the acts.

MCINERNEY: Committing the acts are not good, not well done, not well executed. Fortunately for us, because if they had some good people, it could have a bigger problem.

So, what it shows you is they've been paying people $500 to go out and do this a night and they're running out of people…takers. That is telling you something.

Saddam Fedayeen, they think are pretty well on their last legs. The FRL's, former regime loyalists, those people are starting to go down significantly.

Now, the question is the Jihadists (search). They talk 1 to 200, they're not talking thousands over there. And so the real question is how many are going to be coming? But the important thing that I found were in the areas where they've had these projects, and Ambassador Bremer I think said there were 8,000 so far, where these projects are going on like up in Mosul.

SNOW: You're talking about construction. Construction projects...

MCINERNEY: Construction projects, humanitarian project, schools, repairing electricity, power, cement plant, all these things. This is a...

SNOW: There's that giant mosque. I was in Baghdad last year and you can see this thing. This is huge. You have no idea looking at this picture...

MCINERNEY: Huge.

SNOW: ... how big this thing is. You can see it for miles.

MCINERNEY: Absolutely huge. Yes. And I think Saudi or Kuwait is funding that. But the fact is...

SNOW: I'm sorry. You know what? I'm all wrong about that. I'm sorry. That is in Mosul. So you saw that that's the one that's actually being built...

MCINERNEY: In Mosul (search). You're right. You're right. There is another similar one in Baghdad. But the point is as these facilities come along, the security gets better and better. There is less disruption. The people are buying into it.

SNOW: Did you have any chance to talk to the Iraqi people at all?

MCINERNEY: Yes.

SNOW: And what are they saying?

MCINERNEY: Well, we talked to the governors in about 10 to 12 provinces. They, number 1, want the U.S. They're not interested in the United Nations. They're still...

SNOW: So they don't have much respect for the U.N. All this talk about the international community...

MCINERNEY: The U.N. kept Saddam in business. France, where they used to like France, they're very upset with France because France kept Saddam there. That bothers them.

Now, they know they have a challenge. And you know, Tony, anybody that had initiative, Saddam got rid of. So, these chaps are a little leery…a little leery and they're worried about the pullout. and they're particularly getting concerned about this publicity in the U.S. and this criticism, very destabilizing in their minds.

SNOW: Now, Jim Marshall (search), a Democrat from Georgia, came back a couple weeks ago and said, you know, all this reporting is killing American troops in effect. He said because it is giving heart to the Saddam Fedayeen. Now, my question is, are they actually…I mean are people sitting around looking at the American reporting saying, a ha, the Americans are losing their backbone?

MCINERNEY: Well, it depends what al Jazeera says or some of the…al Arabiya or some of the other TV stations. That's where we have got to get better.

SNOW: Well, of course, they've gotten kicked out, at least, for now.

MCINERNEY: Yes, they have. And frankly, it was very interesting that al Jazeera would be there when an incident would happen. And several times and one begins to think if they, in fact, were fermenting the event.

SNOW: Or at least getting notice and coming to watch.

MCINERNEY: That's correct, at the very least. But the fact is, is there are other inputs that could substantiate what I say. Al Jazeera…I want to be very careful about that.

SNOW: OK.

MCINERNEY: The fact is the troops' morale is great, the Iraqis appreciate America being there, and they appreciate President Bush.

SNOW: All right. So, they want more American troops. What is your assessment of...

MCINERNEY: Not more American troops.

SNOW: OK. You don't think we're going to need...

MCINERNEY: We don't need more American troops. I believe we've peaked out and that we are on a guide slope down. And we're going to fill these in with Iraqis, maybe some foreigners.

SNOW: All right.

MCINERNEY: I went down to the Polish division but they don't quite have the relationship with the Iraqis. The Iraqis want the best in the world. They know the U.S. The mayor in Tikrit, the governor there said we want you; you're the best.

SNOW: Final question. About 15 seconds. Saddam Hussein, are they going to get him? How soon?

MCINERNEY: They think he's over there. I'm from Missouri and that one I'm not sure he is. But they think he is. And they're…every ounce of strength and effort goes after hunting for him.

SNOW: All right. Tom McInerney...Lieutenant General Tom McInerney, thanks for joining us.

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