A militant group in Iraq on Wednesday released seven foreign truck drivers they had held hostage for six weeks after dropping nearly all their demands, while Muslims united behind calls for the release of two French journalists captured by a separate group demanding that France revoke a controversial head scarf law.

Also Wednesday, gunmen opened fire on a convoy carrying former Iraqi Governing Council (search) member Ahmad Chalabi (search) as he returned from Najaf to attend the first meeting of Iraq's 100-member National Council, intended to act as a government watchdog and help shepherd the nation to elections scheduled for January.

The council was formally sworn in Wednesday at a ceremony in the Baghdad convention center, which also was marred by a nearby mortar barrage that injured one person inside the heavily guarded Green Zone enclave, the U.S. military said.

Iraqi oil officials, meanwhile, said Iraq's southern oil terminals are fully operational and exports through them are running at between 1.7 million and 1.9 million barrels a day, despite sabotage attacks on pipelines last week.

Violence between U.S. forces and Shiite militants in Iraq has ebbed since radical cleric Muqtada al-Sadr (search) accepted a peace deal last week to end three weeks of fighting in the holy city of Najaf, but the fighting has spread to other Shiite areas in the country, with fierce clashes in the Baghdad slum of Sadr city on Saturday.

The situation was calm Wednesday, but talks to end the fighting in the Baghdad slum of Sadr City have stalled, with the government refusing militant demands for American troops to keep out of the troubled district, negotiators for the militants said.

Naim al-Kaabi, an al-Sadr spokesman, said a tentative agreement was initially reached Monday with government negotiators on a six-point proposal that would have barred American troops from entering Sadr City without Iraqi government permission.

But government negotiators backpedaled Tuesday, expressing concern that such a deal would incite residents of other Baghdad neighborhoods or Iraqi cities to also call for restrictions on the movement of U.S. troops, al-Kaabi said.

State Minister Qassim Dawoud denied the government had ever agreed to a deal.

"It wasn't (an) agreement," he said. "We don't want to go into negotiations with any armed groups."

Al-Kaabi said al-Sadr aides were willing to hold further talks and had proposed allowing U.S. troops to enter Sadr City without government approval only if they were carrying out reconstruction work. He said he hoped to receive an answer from the government later Wednesday.

The spokesman said the other points of the draft agreement included releasing detainees, handing over heavy weapons such as mortars and rocket-propelled grenades, compensating people who lost relatives or had properties damaged and restoring public services to the neighborhood.

The release of the seven hostages — from India, Kenya and Egypt — came a day after a video surfaced on a militant Muslim Web site showing the purported killing of 12 Nepalese workers kidnapped in Iraq.

The truck drivers had been kidnapped July 21 by a group calling itself "The Holders of the Black Banners" and demanding the truckers' governments pull all their citizens out of Iraq and their Kuwaiti company withdraw as well. The group later added to its demands, insisting all Iraqi prisoners in Kuwaiti and U.S. prisons be freed and compensation be paid to the victims in Fallujah.

The group repeatedly extended a deadline hanging over the hostages as local mediators tried to work out a deal. On Thursday, the kidnappers said they were dropping nearly all their demands and would release the men if their employer, Kuwait and Gulf Link Transport Co., agreed to stop working here.

On Friday, Rana Abu-Zaineh, an official at the company, said it had agreed.

France got help from Arab leaders and Muslims worldwide Wednesday in its efforts to save journalists Christian Chesnot, of Radio France International, and Georges Malbrunot, who disappeared Aug. 19 on their way from Baghdad to the southern city of Najaf. Their Syrian chauffeur also vanished.

A shadowy group calling itself the Islamic Army of Iraq claims to be holding the two, demanding France abolish its ban on Muslim head scarves in public schools, although there were conflicting accounts of whether it set a deadline for Tuesday or Wednesday.

France, which led the opposition to the U.S.-led war in Iraq, has refused to meet the captors' demand to scrap the law, which takes effect this week with the start of the new scholastic year.

Diverse groups ranging from the militant Islamic Hamas, which claimed responsibility for deadly twin blasts in Israel on Tuesday, to Sunni and Shiite Iraqi religious leaders have issued calls on behalf of the French hostages in a show of support not seen previously even though more than 100 hostages have been seized in recent months in Iraq.

Chalabi, a one-time Pentagon favorite who fell out of favor with the United States, said the attack on his convoy was apparently an assassination attempt and wounded two bodyguards.

"There are many terror bands there and we must work very hard, very quickly to free this area from the scourge of the terrorists," Chalabi said.

Chalabi returned to Iraq from Iran earlier this month to face counterfeiting charges. Chalabi denies the allegations, saying he collected fake currency in his role as chairman of the Governing Council's finance committee. The Iraqi Interior Ministry has said it won't arrest Chalabi until unspecified legal issues are cleared up, leaving him free to move around the country.

The National Council has the power to approve the national budget and can veto some government decisions with a two-thirds majority vote. After some last-minute haggling over the wording, delegates walked up to the podium in groups of 10 to take the oath of office.

The National Council "is an important and positive step toward achieving and realizing the dreams of the Iraqi people," said Ibrahim Mohammed Bahr al-Uloum, who chaired the event.

Meanwhile, in Mosul, 225 miles northwest of Baghdad, three Iraqi women who worked at a U.S. base were shot to death late Tuesday and a mortar barrage killed another civilian, police said.