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AP Photos XJD102, 109, 113; PVJ103, NYWD156

AP Graphic WAR DAY 12

By KIMBERLY HEFLING

and

CHRIS TOMLINSON

Associated Press Writers

NEAR NAJAF, Iraq (AP) -- The U.S. Army encircled the Shiite holy city of Najaf on Sunday and said it killed about 100 paramilitary fighters and captured about 50 Iraqis.

The "terror squad members" were killed Sunday at Najaf and another town in fighting with the 82nd Airborne Division, the Central Command said in a statement Monday. It did not further identify the "terror squads" or give other details about the newly captured Iraqis.

The 101st Airborne Division surrounded Najaf, preparing for a possible door-to-door battle to root out Saddam Hussein's fighters -- but leery of damaging some of the faith's most sacred shrines.

Further north, Army brigades crept closer to Baghdad, advancing 10 miles with little resistance, though battles with the Republican Guard loomed. To the south, Marines launched "search-and-destroy" missions to clear the road to Baghdad of Iraqi attackers.

But it was at Najaf -- a city of 300,000, 100 miles south of Baghdad -- that U.S. military leaders were faced with a difficult decision.

It was unclear whether the U.S. strategy is to take Najaf or simply to cordon off the city. There are too many Iraqi fighters to bypass them or leave them unattended; they're a danger to supply lines on the way to Baghdad.

But if Najaf is a key stepping stone to the capital, it is also a dangerous one. On Saturday, a suicide attack killed four U.S. soldiers at a checkpoint north of town; on Sunday, nervous U.S. troops warned approaching drivers they would be shot if they did not leave the area.

"This is our type of fight," said Command Sgt. Maj. Marvin Hill, of the Fort Campbell, Ky.-based air assault division. "This is probably the most dangerous part of combat and that's urban. Sometimes you don't find out who the enemy is until they're shooting at you."

It is also a place where soldiers must tread with sensitivity.

It is in Najaf that Ali, son-in-law of the prophet Muhammad, is buried at an extraordinary shrine, its gold dome and twin minarets gleaming for miles. It is surrounded by low buildings and narrow streets, a nightmare of an urban battleground.

Other Muslim holy figures are buried there and at the vast al Wadi es Salaam cemetery -- one of the world's largest -- that forms a semicircle around the city. Officers speaking on condition of anonymity said some of the Iraqi fighters were hiding there.

A battle that destroyed these holy places could inflame passions of Shiites in Iraq and elsewhere, most notably Iran.

The United States has been hoping that Shiite Muslims, who represent 60 percent of Iraq's population, will rise up against Saddam and his largely Sunni leadership.

Ibrahim Khalili, a prominent Iranian Shiite clergyman, said: "I don't think that anyone dares to attack a holy site in Iraq. An attack on holy shrines will only provoke the uncontrolled anger of Muslims, especially Shiites, with serious consequences to the attackers."

Capt. Micah Pharris, an attorney in the 101st Airborne's judge advocate general's office, said some locations in Najaf are on the military's "no target" list -- to be fired at only in self defense.

"We take our responsibility to these things very seriously and treat them with the utmost respect," he said.

So the Army still held out hope that the battle could be avoided. Using loudspeakers mounted on Humvees, U.S. soldiers on Najaf's perimeter will soon beseech its townspeople to turn over Saddam's zealots.

To the north, brigades of the Army's 3rd Infantry Division advanced 10 miles to near Karbala, just 50 miles from Baghdad -- also a Shiite holy city. One battalion was slowed by the need to shepherd dozens of surrendering Iraqi soldiers.

A military intelligence officer, fluent in Arabic, spoke with farmers who now faced hundreds of U.S. armored vehicles outside their window.

The officer held out fistfuls of candy for the children. The Iraqi men at first stood back, hands behind their heads, struggling to hold up the sticks on which they had tied flour bags in a sign of surrender.

The officer's message: U.S. forces would not hurt them, but they needed to stay away from the American soldiers. As they spoke, artillery fired volley after volley at the nearby city of Al-Hindiyah.

Republican Guard positions between Karbala and Baghdad continued to be targeted for allied bombardment -- Gen. Richard Myers, chairman of the Joint Chiefs of Staff, said more than half of Sunday's sorties were directed at the guard, Saddam's best equipped and trained forces.

At Tallil, the former Iraqi airbase near the southern city of Nasiriyah that has been taken over the U.S. forces, A-10 Warthogs departed for missions throughout the day.

Tallil grows in importance and size with every day; it is nearer to targets than take-off points in the Persian Gulf, Kuwait or elsewhere.

North of Baghdad, meanwhile, U.S.-backed Kurdish troops took control of territory left by Iraqi forces withdrawing toward the oil center of Kirkuk. They advanced almost 10 miles -- slowly, as the cleared more than 300 mines, some the size of ashtrays, others as big as layer cakes.

That territory came without a shot -- unlike the continuing battles with Saddam's fighters in the south.

A British soldier was killed in action near Basra. Royal Marine Commandos at first said they captured an Iraqi general there, but British military spokesman Will MacKinlay later told BBC television that the report was wrong, attributing the mistake to "the fog of war."

In what was described as the Royal Marines' largest operation of the war so far, the British Press Association reported fierce fighting for the town of Abu al Khasib, southwest of Basra. It said 30 Iraqis had been killed and hundreds captured in what the British are calling Operation James, named after James Bond.

A reporter for Sunday Telegraph of London reported that Kalashnikov rifles confiscated from defeated Iraqi soldiers were being collected by British troops to pass to pro-Western rebels in Basra.

Near the southern port city of Umm Qasr, British forces discovered a cache of arms and explosives in a school, an Australian defense spokesman said Monday. Australian mine clearance experts were called in to dismantle the weaponry, military spokesman Brigadier Mike Hannan said.

Marines from 3rd Battalion, 4th Regiment returned Sunday from a two-day mission. Actively seeking engagements, they went to three cities and towns in southern-central Iraq including Afak, about 50 miles east of Najaf. Some of the fighting, they said, was building to building.

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