Libyan rebels said on Tuesday they are ready for the final battle of their more than six-month uprising after their leaders gave Moamer Kadhafi's last loyalists a Saturday deadline to surrender.The head of the rebel National Transitional Council (NTC), Mustafa Abdel Jalil, said the respite was offered to mark the three-day Eid al-Fitr feast which follows the end of the Muslim fasting month of Ramadan.
But NATO vowed no let-up in its bombing of Kadhafi's forces until they stop attacking civilians, warning the elusive Libyan leader was still in active command of some troops.
Rebel military spokesman Colonel Ahmed Omar Bani said he still hoped efforts to negotiate the peaceful surrender of the remaining towns in loyalist hands would bear fruit.
However he added there was no sign of that yet and that time was running out.
"Zero hour is quickly approaching. We would like everyone to know that we are ready for a final military battle," he told a news conference in the rebels' eastern stronghold of Benghazi.
"So far we have been given no indication of a peaceful surrender... We continue to seek a peaceful solution, but on Saturday we will use different methods against these criminals."
The NTC chief said talks were under way with civic and tribal leaders in a number of towns, including Kadhafi's birthplace Sirte in an effort to avoid bloodshed but said they must rapidly come to a conclusion.
"From Saturday, if no peaceful solution is in sight on the ground, we will resort to military force," Abdel Jalil said.
He warned Kadhafi "is not finished yet," as NATO said the strongman was still able to command and control his remaining troops even though he is on the run.
"He is displaying a capability to exercise some level of command and control," Colonel Roland Lavoie, military spokesman of the NATO air mission in Libya, told a news briefing via video link from his headquarters in Naples.
"The pro-Kadhafi troops that we see are not in total disarray, they are retreating in an orderly fashion, conceding ground and going to the second best position that they could hold to continue their warfare," he added.
While rebels sought to talk Kadhafi troops into surrendering in their last major stronghold of Sirte, Lavoie said NATO air strikes were continuing and were now focused around the town.
"Despite the fall of the Kadhafi regime and the gradual return of security for many Libyans, NATO's mission is not finished yet," he said.
"We remain fully committed to our mission and to keeping the pressure on the remnants of the Kadhafi regime until we can confidently say that the civilian population of Libya is no longer threatened.
"Our main area of attention is now the corridor between Bani Walid and the eastern edge of Sirte where pro-Kadhafi forces are maintaining a varying presence in several coastal cities and villages," Lavoie added.
Italian news agency ANSA, citing "authoritative Libyan diplomatic sources," reported on Monday that Kadhafi and his two sons -- Saadi and Seif al-Islam -- were holed up in Bani Walid, a town southeast of Tripoli.
The rebel military spokesman said Kadhafi's once feared intelligence chief, Abdullah al-Senussi, who is wanted by the International Criminal Court, may have been killed as he tried to reach Bani Walid.
Rebel fighters had destroyed two armoured vehicles on the road from the town of Tarhuna closer to the capital, and captured Kadhafi loyalists told them one of the passengers was Senussi, Bani said.
Libyan state television denied rebel claims that another of Kadhafi's sons, Khamis, had been killed as he too tried to reach Bani Walid.
The rebels, meanwhile, renewed their calls for neighbouring Algeria to hand over Kadhafi's wife and three more of his children who fled over the border on Monday.
"We hope that the Algerian government... will work with us to arrest this corrupt family that has has been oppressing the Libyan people as well as stealing their resources for the past 42 years," the deputy chairman of the NTC's executive committee, Ali Tarhuni, said.
Algerian foreign ministry spokesman Amar Belani told AFP the decision to allow Kadhafi's wife Safiya, daughter Aisha and sons Mohammed and Hannibal to cross into the country was based solely on humanitarian concerns.
"These people have been admitted to Algeria for strictly humanitarian reasons," Belani said.
Just hours after crossing over, daughter Aisha gave birth to a girl, a government official said, speaking on condition of anonymity.
"Aisha gave birth very early this morning. She had a little girl. Mother and daughter are doing fine."
The rebels' fledgling new administration meanwhile received a major boost to its finances with clearance from a UN sanctions committee for Britain to release $1.6 billion in seized Kadhafi regime assets to pay for emergency relief.
Similar applications by Germany to release about one billion euros ($1.4 billion dollars) and France to unfreeze about five billion euros ($7.2 billion) were also under consideration.
The NTC executive committee number two said Libya also expected to rehabilitate "a lot" of its oil wells in the "next few days" and downplayed the threat of sabotage by diehard Kadhafi loyalists.
"Kadhafi is on the run now and we now have a good idea where is," Tarhuni said without elaborating. "The threat is present but not too dangerous."
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