U.S. and Iraqi forces on Thursday launched a second phase of the operation to retake Fallujah (search), storming the southern half of the city in an attempt to isolate Sunni fighters in a confined area.

Maj. Gen. Richard Natonski, commander of the 1st Marine Division, said U.S. forces were moving house to house in the rebellious Iraqi city, looking for insurgents and weapons. He said weapons had been found hidden in "nearly every mosque in Fallujah." Ground forces were being backed by an air and artillery barrage aimed at breaking the insurgency.

Natonski announced that 18 U.S. servicemen were killed and 178 wounded in action since the start of the Fallujah offensive. Five Iraqi soldiers were killed and 34 wounded in the same time period. The military estimated 600 insurgents have been killed in the offensive.

The Fallujah campaign has also sent a stream of American wounded to the military's main hospital in Europe. Planes carrying 102 injured troops arrived Thursday at Landstuhl Regional Medical Center (search) in Germany, a day after 69 others were brought in. The numbers are up from the usual 30 to 50 a day the U.S. military hospital receives.

U.S. and Iraqi forces have made several horrific discoveries since the operation began. The latest came Thursday, when U.S. troops found an Iraqi man chained to a wall in a building in northeastern Fallujah, the military said. The man, who was shackled at the ankles and wrists, bruised and starving, told Marines he was a taxi driver abducted 10 days ago and that his captors had beat him with cables.

The rescue follows less hopeful finds, such as a house embedded FOX News reporter Greg Palkot toured. Palkot said his unit was involved in securing a "slaughterhouse" in Fallujah. Palkot said five bodies were found in the house — each of them shot through the head. He said the victims were thought to have been used by kidnappers as human shields.

Natonski said he toured a house in Fallujah's northern Jolan neighborhood where foreign hostages had been held and possibly killed by militants. Natonski described a small, windowless room with straw mats covered with blood on the floor. Also found were a computer and a wheelchair, likely used to move bound hostages, he said.

On Wednesday, an Iraqi commander reported the discovery of "hostage slaughterhouses" in the northern half of Fallujah where foreign captives had been killed. Documents of hostages were found, along with CDs showing beheadings and the black clothes of kidnappers, he said.

After sunset Thursday, U.S. soldiers and Marines launched their main assault across the central highway into Fallujah's southern half after air and artillery barrages pummeled the sector throughout the day, the military said.

Sunni fighters in the sector appear to be trying desperately to break open an escape route through the U.S.-Iraqi cordon closing off Fallujah's southern edge, commanders said. Insurgent mortar fire and attacks have focused on bridges and roads out of the city more than on U.S. troops descending from the north, they said.

Two Marine Super Cobra attack helicopters were hit by ground fire and forced to land in separate incidents near Fallujah, the military said Thursday. The crews were not injured and were rescued.

Since Monday, U.S. and Iraqi troops have been fighting their way through the northern half of Fallujah, reaching the east-west highway that bisects the city and battling pockets of fighters trapped in the north while other insurgents fell back into the south.

Commanders say that since the offensive began, their seal around the city is tight and that fighters still inside have little chance of escape. Some 15,000 U.S. and Iraqi troops are involved in the cordon and the assault inside the city.

Military officials cautioned that the figure of 600 insurgents killed in the city was only a rough estimate. The chairman of the Joint Chiefs of Staff, Gen. Richard Myers, said Thursday that "hundreds and hundreds of insurgents" have been killed and captured.

Commanders had said before the offensive began that 1,200 to 3,000 fighters were believed holed up in the city. But the speed of the U.S. advance has led some officers on the ground to conclude that many guerrillas abandoned the city before the attack so they could fight elsewhere.

Fallujah residents huddled in their homes, staying away from windows in fear of American snipers firing at any movement, an Iraqi journalist in the city said. Most of the city's 200,000-300,000 residents are thought to have fled before the offensive. Those remaining have endured days without electricity, frequent barrages and dwindling food supplies.

The number of civilian casualties in the city is not known.

Gen. Myers, speaking on NBC's "Today" show, called the offensive "very, very successful."

But he acknowledged that guerrillas will move their fight elsewhere. "If anybody thinks that Fallujah is going to be the end of the insurgency in Iraq, that was never the objective, never our intention, and even never our hope."

"There has always been pockets of resistance in this type of fighting, just like there was in World War II — we would claim an island is secure and fight them for months after that," Marine Capt. John Griffin said in Fallujah. "Claiming the city is secure doesn't actually mean that all the resistance is gone, it just means that we have secured the area and have control."

In what could be a sign of progress, the Marines began turning over the northern neighborhood of Jolan to Iraqi forces, signaling that they consider the area relatively secure. Jolan, a dense, historic district of tight alleyways, was considered one of the strongest insurgent positions.

The assault into southern Fallujah follows a day of sometimes fierce firefights as troops tried to clear bands of gunmen in the north.

In one of the most dramatic clashes Wednesday, snipers fired on U.S. and Iraqi troops from the minarets of the Khulafah al-Rashid mosque, the military said. U.S. Marines called in an airstrike, and an F-18 dropped a 500-pound bomb on the mosque, destroying both minarets. Insurgents in streets around the mosque kept up the fight, pinning troops down on a rooftop.

U.S. troops skirmished Wednesday night in the Wihdah and Muhandiseen neighborhoods, according to Iraqi journalist Abdul Qader Saadi, who said he saw burnt armored vehicles and tanks and bodies in the streets.

Meanwhile, rebels have continued heavy attacks elsewhere in a campaign of violence meant to divert troops from Fallujah and show they can keep up the fight even if their strongest bastion falls.

Fighting Escalates in Mosul

Violence escalated dramatically in the northern Iraqi city of Mosul (search) amid a campaign by guerrillas this week to step up attacks elsewhere to divert troops from Fallujah.

Guerrillas attacked police stations in Mosul, overwhelming several, and U.S. and Iraqi troops were trying to put them down, the military said. The city governor was looking to neighboring provinces for police reinforcements, as gunfire and explosions echoed across the city.

Residents said masked gunmen were roaming the streets, setting police cars ablaze and holding some of the city's bridges — despite a government announcement a day earlier that Iraqi forces would seal the bridges and enforce a curfew in the city, one of Iraq's largest.

Guerrillas overwhelmed several police stations, prompting "offensive operations" by U.S. and Iraqi troops in response, the U.S. military said. There was no immediate word on casualties.

Elsewhere, gunmen and U.S.-Iraqi troops clashed in the central towns of Samarra and Mushahdah. A car bomb targeted the governor of Kirkuk in the north, and gunmen attacked the police chief of the southern province of Babil — though both men escaped unharmed. Two more car bombs went off in the southern town of Hillah, wounding eight people.

Car Bomb Kills 17 in Baghdad

In Baghdad, a car bomb ripped through a crowded commercial street, killing 17 people, police said — the second deadly car bomb in the capital in as many days.

The car bomb exploded moments after a U.S. patrol passed on Saadoun Street, and the blast ripped bystanders on the avenue, near major hotels housing foreigners. Huge plumes of black smoke rose in the air as a dozen mangled cars burned, and people pulled bodies and bloodied survivors from the rubble.

A car bomb a day earlier killed 10 people in Baghdad, among a total 28 killed in violence outside Fallujah on Wednesday.

Also Wednesday, militants kidnapped three relatives of Prime Minister Ayad Allawi (search), and a militant group on Wednesday threatened to behead the three in 48 hours unless the Fallujah siege is halted. Militants also claimed to have abducted 20 Iraqi National Guard troops in Fallujah.

The Associated Press contributed to this report.