This is a partial transcript from "The O'Reilly Factor," October 3, 2006, that has been edited for clarity.

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BILL O'REILLY, HOST: No "Talking Points Memo" this evening because I want to get right to our talk with Bob Woodward, author of the new book "State of Denial." The book says President Bush and his war team did not heed warnings about Iraq and they do not brook dissent.

The result, according to the book, is a failed policy and tons of in fighting among Bush cabinet members.

Now last night on "The Factor," former White House Chief of Staff Andrew Card said Mr. Woodward quoted him correctly, but reached faulty conclusions.

(BEGIN VIDEO CLIP)

ANDREW CARD, FORMER WHITE HOUSE CHIEF OF STAFF: I can understand why he might have a perception that he does, but it's the wrong perception. And his perception may reflect his own bias.

O'REILLY: OK.

(END VIDEO CLIP)

O'REILLY: Also, The New York Times today reported that friends of George Tenet believe Mr. Woodward misreported the tone of a meeting about terrorism prior to 9/11, between Tenet, the former CIA chief and Condoleezza Rice.

The Times says, "Both current and former officials, including allies of Mr. Tenet, took issue with Mr. Woodward's account that he and his aides had left the meeting feeling that Ms. Rice had ignored them."

Now to be fair, every controversial book is disputed. Every strong opinion attacked. Joining us now from Washington, author of "State of Denial," Bob Woodward.

OK, I got lots of time with you this evening. So…

WOODWARD: Can I take them one at a time?

O'REILLY: You can -- no, you know, I'm not real interested in that, so much.

WOODWARD: OK.

O'REILLY: I just want to get on the record that some people are questioning, you know, your controversial book. And I think that you obviously expected that.

WOODWARD: Well, of course. But Andy Card, as he said last night on your show, that all the quotes in my book are accurate that he knows about.

O'REILLY: Yes, but the whole…

WOODWARD: OK, it's a great starting point.

O'REILLY: The whole White House team says you were honest in your reportage, but you came in with a preconceived thesis or hypothesis that the war is a failure. And you were looking to bolster that. Now I don't know whether that's true or not, but I want to start at the beginning.

WOODWARD: That's not true.

O'REILLY: I want to start at the beginning. What is the headline of your book? If you were a headline writer, what is the headline?

WOODWARD: The title, "State of Denial" that the evidence going way back even before the Iraq War shows that when people issued warnings, or came in and said -- like, Jay Garner, who was the first postwar Iraq official, went to Rumsfeld in the summer of 2003 and said we've made three tragic decisions. It didn't get through. And they didn't act on it.

Here's the former general, well respected, that they had hired. Comes in and says not only three tragic decisions, but they're reversible. And the issue doesn't even get addressed.

O'REILLY: OK, but in every war, every war, there are people who come in and say you should do it this way, you should do it that way. Lincoln, what did he fire five commanders? Washington was firing commanders. World War II, commanders shuffling in and out. You know, the fog of war and the chaos of war.

But I'm interested in whether you, Bob Woodward, are saying to the American people that Iraq is a lost cause? Are you saying that?

WOODWARD: No, no, no. I'm saying it's been very, very difficult 3 1/2 years. And their public pronouncements, I mean, as you know, and would I'm sure agree with, the president needs to be optimistic and positive.

O'REILLY: Absolutely.

WOODWARD: But for dozens of occasions, very specific that I point out in the book, there are secret intelligence reports where somebody comes in and says, for instance, there's an insurgency. And the president's response is I don't want to read about that in The New York Times rather than dealing with the evidence. That's all.

O'REILLY: But you haven't come to the conclusion that the Iraq War is lost, have you?

WOODWARD: No, no.

O'REILLY: OK, OK. I just want to get that on the record.

WOODWARD: Sure.

O'REILLY: All right. Now the problem with your book then is that the people who want us to lose in Iraq -- and there are far-left people in this country who want us to lose -- and the media, which generally despises the Bush administration, has taken what you've reported, in my opinion, out of context.

Let me just quote you from The New York Times review of your book. All right?

WOODWARD: Sure.

O'REILLY: They say, "In Bob Woodward's highly anticipated new book 'State of Denial,' President Bush emerges as a passive, impatient, sophomoric and intellectually incurious leader, presiding over a grossly dysfunctional war cabinet, and given to an almost religious certainty that makes him disinclined to rethink or reevaluate decisions he has made about the war."

Do you think that's a fair assessment of what you wrote?

WOODWARD: Well, that's one. And there's a lot of unhappy news in this book, if you've looked at it.

O'REILLY: Do you think that's -- no, wait, wait, wait.

WOODWARD: Sure.

O'REILLY: Do you think that is a fair assessment: impatient, sophomoric, intellectually incurious, isn't going to change his mind no matter what? Is that fair?

WOODWARD: Well, I wouldn't use some of those adjectives like sophomoric. But as I've reported in the book on the issue of changing his mind, he told a bunch of Republican leaders last year I won't withdraw even if Laura and Barney are the only ones supporting me.

O'REILLY: I got that, I got that, but it's a commander and chief -- well, you know, it's sending the message to the troops that we're behind you. It's sending the message to the Iraqi government that we're not going to bail on you.

And you know that that kind of psychology has to take place at that level, at the presidential level. You can't send a message to our troops, who are dying and the Iraqi government who is at risk as well that you may or may not back them. You know that.

WOODWARD: Well, no. In fact, for the earlier books, I have long discussions with President Bush about this issue. And I said to him, based on my reporting after 9/11, for instance, he was the voice of realism. He was the one after 9/11, as you may recall, who said it's going to be tough and it's going to be hard. We're probably going to be attacked again.

Now, when there's secret reports saying the insurgency is going to get worse in 2007, he goes public and gives speeches and says the terrorists are in retreat.

I know soldiers on the ground or soldiers who have returned from Iraq who tell me they know how bad it is. The violence is going up. I had somebody who just returned from Iraq call me and said it's like a "Mad Max" movie.

O'REILLY: OK, but Mr. Woodward, I know you hear that. And I hear that, too. But for every soldier who tells you that, I can produce a soldier that tells you the opposite, that we've got them on the run, that if we stay the course, we're going to wear the insurgency down.

WOODWARD: I haven't heard that.

O'REILLY: Well, no, I mean, it is true that in certain areas of the country, Iraq, the insurgency is tamped down. There are three out-of-control provinces right now, according to our military analysts.

So what I'm trying to say is that I don't have any quibble with your book. I think it's an important book. And people should look at it and read it. But I do think that your book is being used by elements in this country that want us to lose in Iraq.

And that things that you say are being seized upon by those people to say look at that idiot Bush. Look at that idiot Rumsfeld. They don't know what they're doing. And they're getting Americans killed. I don't think you believe that.

WOODWARD: OK.

O'REILLY: I don't think you believe that.

WOODWARD: But what's the alternative, Bill? Do I then not write the truth as I find it as a reporter?

O'REILLY: But you just said to me, you don't think we're losing in Iraq. You don't think that. See, what I'm worried about here.

WOODWARD: No. I'm saying -- you asked me the question do -- is this a lost war? And I said, you know, I don't know the answer to that.

O'REILLY: All right.

WOODWARD: The last 3 1/2 years, which is what this book is about, have really been hard. The people on the ground know it.

O'REILLY: Absolutely. This is brutal.

WOODWARD: You know it. You know it.

O'REILLY: Absolutely. I've said it from the very beginning. This is brutal. This is not the war that we first fought. It has morphed into another war. And mistakes have been made.

WOODWARD: That's quite true.

O'REILLY: Mistakes have been made all day long. But I don't know if the United States is going to prevail here.

WOODWARD: I don't either.

O'REILLY: But I do know one thing. Mr. Woodward, I do know one thing, that your book is being used by those who want us to fail. And it's trouble.

WOODWARD: Well, it's factual.

O'REILLY: Let me take a break.

WOODWARD: It's factual.

O'REILLY: All right, let me take a break.

WOODWARD: Sure, sure.

O'REILLY: I got a number of other questions for you.

WOODWARD: Sure, great.

O'REILLY: It's a fascinating conversation.

(COMMERCIAL BREAK)

O'REILLY: Continuing now with Washington Post reporter Bob Woodward, author of the brand new book and big bestseller, "State of Denial." You know, I'm mad at you, because my book is probably going to be knocked out of the No. 1 by your book. I'm just kidding.

WOODWARD: I apologize.

O'REILLY: Couldn't you just kind of -- two weeks later? OK. Now look, you were kind to John Murtha in your book. And Murtha is the guy who does believe we're losing in Iraq, and does believe that we should get out of there…

WOODWARD: As soon as practical.

O'REILLY: Yes, it isn't going to go our way. Now my problem with John Murtha is this, that the unintended consequences of us getting out of there are going to be enormous for the country. And I don't believe Congressman Murtha, who is afraid to come on this program, has thought those through.

WOODWARD: He is?

O'REILLY: Yes, he is. Has thought those through. And again, I go back to the point that there's no question mistakes have been made. And I think every American knows that. I don't even really care about what the politicians say. You know what I mean? It's just you and me. We're Americans.

WOODWARD: OK. Can I respond to the business about Murtha, because I think it's important.

I reported in the book that General Abizaid, who's the central commander, he's the one who -- he's the four-star officer responsible for Iraq. He knows more about it, that he went to see Congressman Murtha. And in a private session, according to Murtha and not addressed or denied at all by General Abizaid, General Abizaid sat there and said to Congressman Murtha you and I are that far apart, 1/4 of an inch.

Now this is the general in charge, who in one form or another is saying we've got to get out of there. I've got other scenes involving General Abizaid, where I think he's rightly worried that the high visibility of the U.S. military going around kicking down doors, looking at Iraqi women and so forth, is feeding the insurgency.

O'REILLY: Every general would be worried about that. Every commander would be worried.

WOODWARD: Yes.

O'REILLY: This is almost an impossible situation. We went in to try to remove a dictator. And we thought the population would.

WOODWARD: OK, I like your word impossible.

O'REILLY: It is. It's almost an impossible situation, because...

WOODWARD: My problem is George Bush is strongest -- any president is strongest -- when he's the voice of realism. Why doesn't he come to the American public and say…

O'REILLY: Because he can't.

WOODWARD: Why?

O'REILLY: And you wouldn't either. And neither would I. If we were in charge of 150,000 lives, and in charge of a fledgling government that is trying to survive on a day-to-day basis against Iranian intrusion, because they're behind…

WOODWARD: You're absolutely right. That's a big element in this.

O'REILLY: We could not go in there and say anything other than what President Bush is saying. You can't do it, because you have people on the line. You've got a rally. And you've got to win it. Now the problem is.

WOODWARD: You rally with the truth. You rally with the truth.

Look at the times this country has been at war when presidents have come out and said, you know, look, we've got a big difficulty here. And -- but we're going to go do the job.

I -- look, you talk about "no spin" and "straight talk" and so forth. You know what the American people like? Straight talk. And even if it's bad news. This is a big…

O'REILLY: This is a different situation, Mr. Woodward. And I'm going to politely disagree with you here.

WOODWARD: OK.

O'REILLY: I don't think that the Bush administration can, at this juncture, tell the world this is a debacle.

WOODWARD: The truth.

O'REILLY: OK? Look, the truth is not defined. It is not defined. We could still prevail. If they partition this country…

WOODWARD: Oh, I think that's true.

O'REILLY: Right.

WOODWARD: That's true.

O'REILLY: So you can't go in with the negativity and say oh, my God, we can't do it. It's this, that, and the other thing. You've got to go in.

WOODWARD: But will you bear with me on this, because I think it's important. And somebody suggested this to me who was involved, that the president could come out and give a speech and say, you know, we invaded Iraq. It was the right thing to do. It is -- turned out to be a monumental task that we did not anticipate.

It has been much, much more difficult. And we need to continue with this task. But you need to know that things have really been much more difficult than I told you.

O'REILLY: Yes, it's a different war.

O'REILLY: OK, but his approval ratings would soar. It's just like Jack Kennedy…

O'REILLY: You might be right.

WOODWARD: After the Bay of Pigs invasion when he came out and said it rests with me. It was my decision.

O'REILLY: Mr. Woodward, I'm going to take last word.

WOODWARD: Sure.

O'REILLY: And we appreciate. You're welcome any time. Remember one thing about JFK and the Bay of Pigs. All right? They lost. OK?

WOODWARD: Fair point.

O'REILLY: This one is a jump ball. And I'm praying, and I hope you're praying, everybody watching me is praying that the United States of America can win, and stabilize this country, and make it a bulwark against the Iranians, because it's they we're fighting. We're fighting them now.

WOODWARD: Look, I agree, totally.

O'REILLY: All right. We'll get you back.

WOODWARD: Iran is the issue.

O'REILLY: We'll get you back.

WOODWARD: Thank you, sir.

O'REILLY: And it's always a pleasure talking to you.

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