More than 1600 Mississippi national guardsmen were activated on Tuesday, and the Alabama Guard planned to send two battalions to Mississippi.
Crews worked to clear highways. Along one Mississippi highway, motorists used chainsaws to remove trees blocking the road.
Tree trunks, downed power lines and trees and chunks of broken concrete in the streets hampered rescue efforts.
Swirling water in many areas contained hidden dangers.
The Mississippi governor said the death toll in one county could be as high as 80.
"The devastation down there is just enormous," Governor Haley Barbour said on NBC's Today show, the morning after Katrina howled ashore with winds of 233kph.
"At first light, the devastation is greater than our worst fears. It's just totally overwhelming," Louisiana Governor Kathleen Blanco said after Katrina engulfed thousands of homes in one of the most punishing storms on record in the United States.
Barbour said there were unconfirmed reports of up to 80 deaths in Harrison County, which includes Gulfport and Biloxi, and the number was likely to rise.
"We know that there is a lot of the coast that we have not been able to get to," the governor said.
Katrina could become the most
expensive storm in US history
"I hate to say it, but it looks like it is a very bad disaster in terms of human life."
Late on Monday, Harrison county emergency operations centre spokesman Jim Pollard said about 50 people had died in the county, with about 30 of the dead at a beach-side apartment complex in Biloxi.
Three others were killed by falling trees in Mississippi and two died in a traffic accident in Alabama, authorities said.
In Louisiana, officials said people in some swamped neighbourhood were feared dead but gave no immediate numbers.
"All I know is when my people go out, they tell me there are a lot of people awaiting rescue. I hear there are hundreds of people still on their rooftops," said General Ralph Lupin, commander of National Guard troops at the Superdome in New Orleans, where 10,000 people had taken shelter.
The death toll does not include 11 deaths in South Florida, when a weaker Katrina first hit land last week.
In New Orleans, residents who rode out the brunt of Katrina faced a second, more insidious, threat as two levee breaches sent water from Lake Pontchartrain coursing through city streets on Tuesday.
Colonel Rich Wagenaar of the Army Corps of Engineers said a breach in the eastern part of the city was causing flooding and "significant evacuations" in Orleans and St Bernard parishes
He did not know how many people were affected.
"I hate to say it, but it looks like it is a very bad disaster in terms of human life"
Authorities said there was also a levee breach in the western part of the city that began on Monday afternoon and may have grown overnight.
Across the Gulf Coast, people were rescued as they clung to rooftops, hundreds of trees were uprooted and sailboats were flung about like toys when Katrina crashed ashore in what could become the most expensive storm in US history.
The rising water forced one New Orleans hospital to move patients to the Louisiana Superdome, where some 10,000 people had taken shelter, and prompted the staff of New Orleans' Times-Picayune newspaper to abandon its offices, authorities said.
Hotels were evacuated as well as the water kept rising.
In New Orleans, water began rising in the streets on Tuesday, apparently because of a break in a levee along a canal leading to Lake Pontchartrain, and prompted the evacuation of hotels and offices.
Officials began using helicopters to drop 1350kg sandbags into the breach, and expressed confidence the problem could be solved within hours.
Along the Gulf Coast, tree trunks, downed power lines and trees, and chunks of broken concrete in the streets prevented rescuers from reaching victims.
Katrina has inflicted widespread
damage on New Orleans
Tens of thousands of people will need shelter for weeks if not months, said Mike Brown, director of the Federal Emergency Management Agency.
And once the floodwaters go down, "it's going to be incredibly dangerous" because of structural damage to homes, diseases from animal carcasses and chemicals in homes, he said.
Officials warned people against trying to return to their homes, saying that would only interfere with the rescue and recovery efforts.
The hurricane knocked out power to more than one million people from Louisiana to Florida, and authorities said it could be two months before electricity is restored to everyone.
Katrina also disrupted petroleum output in the centre of the US oil refining industry and rattled energy markets.
According to preliminary assessments by AIR Worldwide Corp, a risk-assessment company, the insurance industry faces as much as $26 billion in claims from Katrina.
That would make Katrina more expensive than the previous record-setting storm, Hurricane Andrew, which in 1992 caused $21 billion in insured losses to property in Florida and along the Gulf Coast.
Mississippi's economy was dealt a blow that could run into the millions, as the storm shuttered the flashy casinos that dot its coast.
The governor said emergency officials had reports of water reaching the third floors of some casinos.
After striking the Gulf Coast as a Category 4 hurricane, Katrina was soon downgraded to a tropical storm as it passed through eastern Mississippi, moving north at 34kph.
Winds early on Tuesday were still a dangerous 97kph.
By midday Tuesday, Katrina was downgraded to a tropical depression, with winds around 56kph.
It was moving northeast through Tennessee at around 34kph.
The storm may spawn tornadoes
over the southeast
Forecasters said that as the storm moves north over the next few days, it may spawn tornadoes over the southeast and swamp the Tennessee and Ohio valleys with a potentially ruinous 20cm or more of rain.
At the Superdome, where power was lost early on Monday, thousands spent a second night in the dark bleachers.
With the air-conditioning off, the carpets were soggy, the bricks were slick with condensation, and anxiety was rising.
"Everybody wants to go see their house. We want to know what's happened to us. It's hot, it's miserable and, on top of that, you're worried about your house," said Rosetta Junne, 37.
A water main broke in New Orleans, making it unsafe to drink the city's water without first boiling it.
Looting broke out in Biloxi and in New Orleans, in some cases in full view of police and National Guardsmen.
On New Orleans' Canal Street, the main thoroughfare in the central business district, looters sloshed through hip-deep water and ripped open the steel gates on the front of several clothing and jewelry stores.
Police made several arrests for looting.