By Hamad Mohammed and Alan Baldwin
The International Automobile Federation (FIA) gave the green light after some doubt that the prestigious Formula One event, cancelled in Bahrain last year amid a violent crackdown on pro-democracy demonstrators, was on.
"All the teams are happy to be there," Formula One chief Bernie Ecclestone said in Shanghai, which hosts the Chinese Grand Prix this weekend. "There's nothing happening. I know people who live there and it's all very quiet and peaceful."
But on Friday several thousand people joined a funeral procession for a man shot during an anti-government protest two weeks ago, in Salmabad just outside the capital Manama. Police were on hand but kept their distance from the mourners.
"Down with Hamad!" chanted some marchers, referring to King Hamad bin Isa Al Khalifa, who brought in an independent commission last year to investigate crimes during the crackdown and has promised reforms.
Two other rallies were planned later on Friday.
Security forces were also on alert in case clashes between youths and police in Shi'ite Muslim villages escalate, or if the health of a jailed activist on hunger strike deteriorates. Two nights ago, gangs of youths attacked cars and tried to march on a neighboring Shi'ite district after a Sunni Muslim-led rally.
Bahrain's Sunni rulers are keen to stage a successful race as part of their efforts to show progress on reforms and reconciliation with the majority Shi'ite community after the protests last year, which were suppressed with the help of troops from neighboring Saudi Arabia.
The crackdown, in which more than 30 people were killed, was condemned by several international human rights groups.
The decision to proceed with this year's Grand Prix in Bahrain has split domestic opinion, and Amnesty International said it did not support the race.
"Holding the Grand Prix in Bahrain in 2012 risks being interpreted by the government of Bahrain as symbolizing a return to business as usual," the rights group said in a statement. "The government must understand that its half-hearted measures are not sufficient - sustained progress on real human rights reform remains essential."
Yasmeen, a Sunni from Budaiya who said she would be at the races with her friends, said: "It's exactly what we need to right now to unite us all and have a driving force to bring us all together, which is the common interest of the Formula One."
But Abdulla Hassa, a 19-year-old Shi'ite from Sanabis village, said that after last year's repression and killings "there's no way Formula One should be held".
Another factor weighing on a tense situation is the health of jailed rights activist Abdulhadi al-Khawaja, on hunger strike for two months, who was moved to a military hospital this week.
The United States has expressed concern about his condition and Denmark, whose citizenship Khawaja also holds, has been pressing for his release.
Four independent U.N. human rights experts urged Bahrain on Friday to release Khawaja, who has been sentenced to life for trying to topple the monarchy and other offences.
"In view of the urgency of the matter, we strongly call on the government to seriously reconsider the offer by Denmark to transfer al-Khawaja, a dual citizen of Denmark and Bahrain, on humanitarian grounds, for medical treatment to Denmark," they said.
"We believe that our conflict will take a long time, and we do not want to take steps that are economically damaging," said Mattar Mattar of al-Wefaq and a former member of parliament.
The mostly Shi'ite pro-democracy demonstrators, originally inspired by the "Arab Spring" revolts which toppled the rulers of Tunisia and Egypt early last year, demand a greater say in government and better access to economic opportunities.
Daily protests continue in mainly Shi'ite towns and villages while a heavy police presence has kept them out of the Manama.
"The country is not prepared to host Formula One," said Fadel Mohammed, a fisherman. "First we solve the problems in the country and then we will host it with the will of God."
Also at stake is a great deal of money. The last race to be held in Bahrain, in 2010, brought in more than 100,000 visitors and half a billion dollars in spending to the tiny island state.
"It brings a lot of numbers of tourists from all over the world including Gulf and other Arab countries and other European countries," said Jameel, a Sunni from Riffa.
Circuit officials said preparations are fully under way.
"For the overwhelming majority of people in the kingdom, be they residents or visitors, daily life is back to normal and has been for many months now," said Jassim Albardooli, a spokesman for Bahrain International Circuit.
(Reporting by Hamad Mohammed; Writing by Reed Stevenson; Editing by Mark Heinrich)