"The 98 people were only questioned for a few hours and then all were freed, including lawyer Aktham Naisse," said Anwar Bunni, a spokesman for the Human Rights Association of Syria, on Tuesday.
Naisse, a dissident, has already spent six years in prison. He is president of the Committees for the Defence of Democratic Freedoms and Human Rights in Syria (CDDS), the group which organised Monday's sit-in to call for greater freedoms and the lifting of Syria's state of emergency, in place since 1963.
A CDDS activist, Muzone Murshed, who was among those arrested, confirmed that everyone had been released.
"The releases were done in steps, the journalists first, then the seven women, and then all the others," she said.
The US diplomat, whose name and position were not divulged, was questioned for an hour, in what Washington termed a "clear violation of Vienna Conventions".
Al-Assad has started the reform
process, say supporters
The diplomat was "simply observing the demonstration," which was being watched by other diplomats and foreign journalists, US State Department spokesman Richard Boucher said.
"Our embassy in Damascus has protested this incident in the strongest terms," he added.
Mahdi Dakhlkallah, editor in chief of the ruling party's Al-Baath newspaper, played down the arrests. "The questioning took place because the demonstrators had not sought prior authorisation," he said.
He added that in Syria there is "a nationalist opposition which we (authorities) understand. Their claims have been taken into account in the reform process undertaken by the president (Bashar al-Assad), the government and the Baath party."
"Unfortunately, there is another opposition which wants to exploit the pressures" to which Syria has been submitted since the fall of the Saddam Hussein government and the ruling Baath party in Iraq in April 2003, Dakhlkallah said.
"Unfortunately, there is another opposition which wants to exploit the pressures"
editor-in-chief, Al-Baath newspaper
Some 6,000 intellectuals and human rights supporters have already signed a petition circulating on the Internet.
Its signatories, mainly democracy activists, lawyers and intellectuals, want al-Assad to implement radical political reform, including the lifting of the state of emergency and the release of political prisoners.
The petition says the state of emergency has "led to the paralysis of society and to the imprisonment of thousands of citizens for political reasons."
It calls for the end of special courts, arbitrary arrests, the release of political prisoners and the right to set up political parties.