Forces loyal to Libya's Muammar Gaddafi killed seven rebels in a counter-attack in a key town on Tuesday, hospital sources said as the leader's camp vowed to push on with a war to crush a five-month uprising.
Gaddafi's son said the conflict would continue until the rebellion was wiped-out, whether or not NATO stops its bombing campaign, leaving little room for diplomacy to seek an end to a war that has killed thousands and divided Libya.
The rebels and their Western backers kept up the pressure on the veteran leader as the Muslim holy month of Ramadan began, with NATO bombing military targets and dropping leaflets over the capital calling on loyalists to give up.
The rebels, who have seized about half the country but frequently lose ground to counter-attacks by better armed and trained Gaddafi forces and remain dogged by their own internal divisions, had been seeking to consolidate gains around Zlitan, a town 160 km (100 miles) east of Tripoli.
A war that some thought might be over in weeks once NATO forces, backed by a United Nations mandate to protect civilians, started to bomb Gaddafi's military installations in March is instead dragging on into the hot summer and a month of fasting.
The rebels have launched an offensive in the Western Mountains, near Tunisia and from Misrata -- Libya's third largest city some 210 km (130 miles) east of the capital which the rebels clung onto after weeks of street-to-street fighting. They hope to march west through Zlitan and on to Tripoli.
But hospital sources in Misrata said that a counter-attack by Gaddafi forces on Tuesday morning had killed seven rebels and wounded another 65 fighters in Zlitan.
A Reuters reporter in between the two towns saw plumes of smoke and heard intermittent gunfire coming from Zlitan.
"No one should think that after all the sacrifices we have made, and the martyrdom of our sons, brothers and friends, we will stop fighting. Forget it," state television showed Saif al-Islam, the leader's son, saying to families displaced from the eastern rebel stronghold of Benghazi.
"Regardless of whether NATO leaves or not, the fighting will continue until all of Libya is liberated," he added, in comments that were made on Sunday but broadcast on Monday evening.
Saif al-Islam has not been seen speaking in public for several weeks.
A United Nations peace envoy was dispatched to Libya last week and Gaddafi's government had previously said that it would only start talks if NATO stopped its bombing raids.
However, after talks with both sides, the envoy Abdel Elah al-Khatib left without making any visible progress and the world body said the two camps were far apart.
Gaddafi may also sense an opportunity to exploit divisions caused by the slaying last week of the top rebel military commander in as yet unexplained circumstances.
The Muslim holy month began in Libya on Monday, with many saying it might lead to a lull in fighting. But rebels in Zlitan were optimistic after their first day of fasting.
"Fasting has only increased our determination and resolve to defeat the brigades of the tyrant (Gaddafi) to liberate Zlitan entirely, God willing, and make our way to our capital Tripoli, God willing," said frontline rebel commander Husam Hussein, whose unit had made gains on the eastern outskirts of Zlitan.
At a rebel base nearby, off-duty fighters prepared meals of small pizzas and pastries as milk and juice were cooled in crushed ice before being sent to the front, where sporadic gunfire could be heard late on Monday.
NATO said it had hit about a dozen targets, including ammunition dumps and missile systems on Monday.
At a briefing in Brussels, NATO military spokesman Colonel Roland Lavoie said the frontline was fluctuating, but the rebels had succeeded in disrupting the main supply routes for Gaddafi's forces.
"LONG LIVE GADDAFI"
Despite fears that slow rebel progress on the ground and mounting bills for bombing raids will curb enthusiasm in Western capitals, Britain and France, leading members of NATO, have pledged that they will continue for as long as needed.
Some 30 nations have recognised the Benghazi-based rebel government and France on Monday announced it would place $259 million in unfrozen Libyan assets at the disposal of the Transitional National Council (TNC).
But others are concerned that in recognising and backing the rebels with air strikes on Gaddafi forces, NATO has overstepped its U.N. mandate to protect civilians.
Venezuela's President Hugo Chavez gave the Libyan leader, who is wanted by the International Criminal Court on charges of crimes against humanity in attacks on civilians, some rare international support.
"Long live Muammar Gaddafi," he said in a televised address.
The rebels and their Western backers suffered a severe blow last week when General Abdel Fattah Younes, a former Gaddafi security minister who defected to the Benghazi side, was assassinated.
The murky circumstances of Younes's killing, which took place after he was summoned back from the front by his superiors, have prompted speculation of conspiracies and raised fears over the rebels Western nations are lining up behind.
"The rebels that the West has been counting on to replace the Gaddafi regime apparently cannot even control their base territory in eastern Libya, let alone govern the entire country," Stratfor, a global intelligence company, said.
Younes's family said the rebel TNC had acted "negatively" over the killing and warned the family may be forced to turn for international help to establish the truth.