U.S. Marines negotiated a plan Thursday to pull back forces from Fallujah (search), a move that could lift a nearly monthlong siege and allow an Iraqi force led by a former Saddam Hussein-era general to handle security. Fresh clashes broke out despite news of the proposal, and U.S. warplanes dropped bombs on insurgent targets.

Ten U.S. soldiers and a South African (searchcivilian were killed in attacks elsewhere, including eight Americans who died when a bomb hit as they tried to clear explosives from a road south of Baghdad.

Negotiations were also taking place in the southern city of Najaf (search), where tribal leaders and police discussed a proposal to end the U.S. standoff and for followers of a radical Shiite cleric to leave the city.

U.S. military commanders met with former Iraqi generals Thursday to discuss details of the Fallujah proposal, Marine Capt. James Edge said.

However, U.S. officials in Washington and Iraq gave somewhat differing accounts on the status of any agreement.

A Marine commander in Iraq said a deal was reached but later said "fine points" needed to be fixed.

Deputy Defense Secretary Paul Wolfowitz said there was no deal yet and officials were "still working on it."

Pentagon spokesman Larry Di Rita said he could not rule out that an agreement was in (AP) — place, but he said the U.S. military command in Baghdad told him that they could not confirm it.

In an apparent gesture to help the Fallujah negotiations, U.S. authorities Thursday released the imam of the city's main mosque, Sheik Jamal Shaker Nazzal, an outspoken opponent of the U.S. occupation who was arrested in October.

One possible sticking point was a U.S. demand for insurgents to turn over those responsible for the March 31 killing and mutilation of four American contract workers, whose bodies were burned and dragged through the streets. Di Rita said winning assurances that the perpetrators would be turned over remains a U.S. goal of the Fallujah talks.

The plan for the Iraqi force outlined a surprising new way to find an "Iraqi solution to an Iraqi problem," said Marine Lt. Col. Brennan Byrne. It envisions a force of some 1,100 members called the Fallujah Protective Army.

The force, which would replace the Marine cordon and move into the city as U.S. troops pull back, would be led by a leading general from Saddam's army and include Iraqis with "military experience" from the Fallujah region, Byrne said.

It could even include gunmen who fought with guerrillas against the Americans — particularly ex-soldiers disgruntled over losing their jobs when the United States disbanded the old Iraqi army, another Marine officer said, speaking on condition of anonymity.

The new force would not include "hardcore" insurgents or Islamic militants holed up in the city, the officer said. Many of the guerrillas in Fallujah are believed to be former members of Saddam's regime or military.

Byrne identified the commander of the new force as Gen. Salah, a former division commander under Saddam. He said he did not know the general's full name, but Lt. Gen. Salah Abboud al-Jabouri, a native of the Fallujah region, served as governor of Anbar province under Saddam.

Marines on the south side of the city began packing up gear Thursday in preparation to withdraw and breaking down earthen berms and other security barriers. But Byrne later said the timing for a pullback was unclear.

Washington is under intense international pressure to find a peaceful solution to the standoff that has killed hundreds of Iraqis and became a symbol of anti-U.S. resistance in Iraq, fueling violence that made April the deadliest month for American forces.

U.S. Marines encircled the city of 200,000 on April 5. Hospital officials said more than 600 Iraqis, many of them civilians, were killed in the fighting along with eight U.S. Marines. But the figures were disputed by Iraq's health ministry and an exact toll was not known.

As negotiations continued, so did the fighting that Fallujah has seen since the beginning of the week. Marines and guerrillas skirmished, with blasts and sporadic gunfire heard from the northern part of the city. Residents reported buildings on fire.

Three F/A-18 Hornets flying off the aircraft carrier USS George Washington in the Persian Gulf dropped three 500-pound bombs Thursday on targets in the Fallujah area in support of Marines, Navy spokesman Lt. Cmdr. Danny Hernandez said.

Witnesses reported rockets fired into the Golan neighborhood, a bastion of the insurgency, and two houses were on fire. Ambulances and fire engines had to turn back amid the gunfire. Marines and guerrillas have clashed repeatedly in the northern district since Monday.

Inside the city, some residents breathed a sigh of relief at news of a pending deal.

"I will be so happy today. I'm hoping for a quiet night without bombs or explosions," said Hassan al-Halbousi, who spent the entire siege alone in his house after sending his family to Baghdad.

"I can't believe what we have gone through," he said. "The bombing has terrified me. No one is in the streets."

In Rome, meanwhile, the families of three Italians held hostage in Iraq led a march Thursday by several thousand people near St. Peter's Square after the abductors threatened to kill the captives unless Italians carried out a "huge demonstration" against the war.

The relatives described the march as a peace rally and said they were not giving in to the captors. Four Italian security guards working in Iraq were abducted April 12, and the kidnappers killed one of them a few days later.

U.S. forces were also in negotiations for the holy Shiite city of Najaf, where the radical cleric Muqtada al-Sadr has been holed up.

Ahmed Shaybani, a spokesman for al-Sadr, told The Associated Press that talks were under way between Najaf police and tribal leaders about ending the U.S. standoff. He said a proposal emerged under which al-Sadr followers would hand over security to the Najaf police and the Mahdi army would leave the city.

Shaybani said the proposal would be accepted if the Americans agreed not to enter Najaf and did not act in a hostile way toward its holy sites. Al-Sadr, who is wanted in the killing of another cleric, would remain in the city.

Shaybani said he doubted the U.S. forces, which have vowed to capture or kill the cleric, would agree to the terms. But, he said, "we accepted the offer on condition that the Americans do not enter Najaf" or take action around its Shiite shrines.

Shaybani said the issue of al-Sadr and the arrest warrant should be left until after June 30, when the U.S.-appointed council would hand power to a caretaker government.

Meanwhile, eight U.S. soldiers were killed Thursday when their team from the 1st Armored Division was attacked while removing roadside bombs from a key highway, near the town of Mahmudiyah, south of the capital, the military said in a statement.

A driver in a station wagon neared the team, then "detonated an explosive device," the statement said.

Earlier Thursday, another U.S. soldier from the Texas-based 1st Cavalry Division was killed by a rocket-propelled grenade attack on his patrol in eastern Baghdad, the military said. A U.S. soldier was killed and another wounded when a roadside bomb exploded near their convoy outside the city of Baqouba, 24 miles north of the capital, the military said.

Gunmen attacked a car in the southern city of Basra, killing a South African, the fifth citizen of that country to die in Iraq.

The American deaths raise to 126 the number of U.S. troops killed in combat in April, the bloodiest month for U.S. forces in Iraq. The military said another soldier died in a vehicle accident in western Baghdad.

At least 736 U.S. troops have died in Iraq since the war began in March 2003. Up to 1,200 Iraqis also have been killed this month.