A South Korean citizen held hostage in Iraq was beheaded by terrorists despite promises of an extended deadline to meet their demands.

Al-Jazeera television broadcast a videotape of a terrified Kim Sun-il (search), 33, kneeling, blindfolded and wearing an orange jumpsuit similar to those issued to prisoners at Guantanamo Bay, Cuba.

Kim's shoulders were heaving, his mouth open and moving as if he were gulping air and sobbing. Five hooded and armed men stood behind him, one with a big knife slipped in his belt.

One of the masked men read a statement addressed to the Korean people: "This is what your hands have committed. Your army has not come here for the sake of Iraqis, but for cursed America."

Kim's body was found west of Baghdad by American soldiers at 5:20 p.m. Iraq time, South Korean Foreign Ministry spokesman Shin Bong-kil said.

The South Korean embassy in Baghdad confirmed the body was Kim's by studying an e-mailed photograph, Shin said.

"It breaks our heart that we have to announce this unfortunate news," he added.

Hours later, the United States launched an airstrike in Fallujah on what the U.S. military said was a safehouse used by followers of the country's most-wanted terrorist: Abu Musab al-Zarqawi (search), a Jordanian whose Monotheism and Jihad movement was believed behind Kim's beheading.

An audio recording purportedly made by al-Zarqawi and found online Wednesday threatened to kill Iraq's interim prime minister next.

"As for you [Iyad] Allawi ... you didn't know that you have survived already traps we made for you, but we promise you that we will continue the game until the end," the online recording said.

"You are the symbol of evil and the infidel nation; you are the source of all traitors."

It was not immediately possible to authenticate the recording, but the voice sounded like al-Zarqawi's.

The video of Kim's execution as broadcast did not show the actual killing. Al-Jazeera said the tape contained pictures of Kim being slaughtered but the channel decided not to air it because it could be "highly distressing to our audience."

After news of Kim's death broke, South Korean television showed Kim's distraught family weeping and rocking back and forth with grief at their home in the southeastern port city of Busan.

South Korean President Roh Moo-hyun (search), addressing the nation on television Wednesday, strongly condemned terrorism and rejected the kidnappers' claim that the 3,000 new troops his government is sending would hurt Iraqis.

"The South Korean plan to send troops to Iraq is not to engage in hostilities against Iraqis or other Arab people but to help reconstruction and restoration in Iraq," Roh said.

South Korea's planned troop deployment will make it the third-largest coalition partner there behind the United States and Britain. Amid increasing tensions over communist North Korea's nuclear program, South Koreans have been divided over the issue of sending troops out of the peninsula and to Iraq.

"It's horrible. I really don't believe this," Lee Hong-sung, 56, a taxi driver, told the South Korean news agency Yonhap. "One of my sons is in the army and I don't know whether it's really good for us to send troops to Iraq."

Anti-war activists planned large-scale rallies in opposition to the troop dispatch, Yonhap reported.

Brig. Gen. Mark Kimmitt (search), coalition deputy operations chief, said the body of an Asian male was found west of Baghdad on Tuesday evening.

"It appears that the body had been thrown from a vehicle," Kimmitt said in a statement. "The man had been beheaded, and the head was recovered with the body."

President Bush condemned the hostage's murder as "barbaric."

U.N. Secretary-General Kofi Annan said no cause could justify the "heartless" murder of the South Korean hostage.

Al-Jazeera, an Arabic-language satellite station, first reported Kim's death, saying it had received a videotape of Kim and his captors. The tape didn't show his beheading and Al-Jazeera did not say how it got the tape or when Kim had been killed.

Kim's abductors originally threatened to execute the hostage by Tuesday if South Korea didn't call off its planned deployment of about 3,000 troops to Iraq. The kidnappers then extended their execution deadline during negotiations, according to Ahmed al-Ghreiri, an employee of the NKTS security firm that had been acting as an intermediary.

But his captors apparently changed their minds and decapitated Kim anyway.

Kim, who spoke Arabic, worked for Gana General Trading Co., a South Korean company supplying the U.S. military in Iraq. He was believed kidnapped several weeks ago.

Bush reacted to Kim's murder in an Oval Office photo opportunity with Prime Minister Peter Medgyessy of Hungary, a close ally in Iraq and the war on terror. Medgyessy said his country would not withdraw its troops from Iraq despite the recent killing of a Hungarian soldier there.

"The free world cannot be intimidated by the brutal actions of these barbaric people," Bush said.

Kim was shown on the new videotape kneeling, blindfolded and wearing an orange jumpsuit similar to those issued to prisoners at Guantanamo Bay, Cuba — and to those that American hostages Nicholas Berg (search) and Paul Johnson Jr. (search) wore during their own recent beheadings.

The tape showed five hooded men standing behind Kim, one reading a statement and gesturing with his right hand. Another captor had a big knife slipped in his belt.

One of the masked men said the message was intended for the Korean people.

"This is what your hands have committed," he read. "Your army has not come here for the sake of Iraqis, but for cursed America."

The Al Qaeda-linked group Monotheism and Jihad took responsibility for Kim's death, according to Al-Jazeera.

After the news of Kim's death broke, South Korean television showed Kim's distraught family members weeping and rocking back and forth with grief at their home in the southeastern port city of Busan.

The White House reacted with outrage.

"Obviously that would be horrible news to hear," said Press Secretary Scott McClellan, who received the first news of the execution during a White House briefing. There is "simply no justification for those kinds of atrocities."

On Friday, Lockheed Martin engineer Johnson, an American who'd lived in Saudi Arabia for about a decade, was beheaded by his Al Qaeda-linked captors near Riyadh.

Last month, Berg was beheaded in Iraq, possibly by the hand of Al Qaeda-linked terrorist Abu Musab al-Zarqawi.

And in early 2002, Wall Street Journal reporter Daniel Pearl (search) was kidnapped and beheaded in Karachi, Pakistan by Al Qaeda abductors.

Earlier Tuesday, Seoul (search) said it would evacuate the last of its 22 nationals in Iraq by early July. Most work for South Korean companies that supply the U.S. military, said Commerce, Industry and Energy Minister Lee Hee-beom.

NKTS official Kim Hyun-taek said earlier Tuesday the captors had asked to negotiate with Choi Sung-gap, president of the company, who planned to leave for Iraq as early as Wednesday afternoon.

His captors had originally threatened to kill Kim if the South Korean government did not cancel its planned deployment of 3,000 troops to Iraq by early Tuesday.

But the president of NKTS, which supplies the bodyguards for Jordan's royal family, said earlier Tuesday that they'd dropped that condition and put forth new demands that Seoul was willing to meet.

"It is highly likely we will see a resolution because in Iraq they have a good impression about South Korea," said Choi, who made the comments to South Korean reporters on Tuesday before news of Kim's execution broke.

In a dispatch from Baghdad, Yonhap quoted an "informed source" as saying that negotiations with the kidnappers collapsed over the South Korean government's refusal to drop its plan to send troops.

"As a condition for starting negotiations for Kim's release, the kidnappers demanded that South Korea announce that it would retract its troop dispatch plan," the source was quoted as saying. "This was a condition the South Korean government could not accept. As the talks bogged down, the kidnappers apparently resorted to an extreme measure."

Kim was believed to have been kidnapped about 10 days ago. A videotape broadcast by Al-Jazeera before the most recent one of him in a jumpsuit showed him pleading for his life but without a blindfold and still wearing his own clothes.

"I don't want to die, I don't want to die," Kim pleaded in that first video, released by his captors Sunday as he begged his government to end its involvement in Iraq.

The recent abductions and attacks appear aimed at undermining the interim Iraqi government set to take power June 30, when the U.S.-led occupation formally ends.

Fox News' Catherine Donaldson-Evans and The Associated Press contributed to this report.