Lieutenant General Eugenio Cedo, a regional military commander, said they were unable to "assess properly the strength of the enemy during the assault".
The military is still looking for one of the group's commanders, Isnilon Hapilon, wanted by both the US and Philippine governments for alleged kidnappings and bombings.
General Hermogenes Esperon, the military chief of staff, said Hapilon was among those being hunted by troops in Basilan.
It remains unclear if Hapilon was involved in Saturday's incident.
"We are making a promise to make the province unfit for those who want to rule it with arms," Esperon said.
"The Muslims of the Philippines want autonomy and equal rights - democracy has failed them so they have taken up arms"
Shafiq, Dhaka, Bangladesh
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On nearby Jolo island, troops raided a suspected Abu Sayyaf safe house early on Sunday, a military official said.
Army Major General Ruben Rafael said 19 men, women and children were taken into custody, and four M-16 rifles and ammunition were seized.
He said 14 of them were released but investigators were trying to ascertain if the five men still in custody were Abu Sayyaf fighters.
A military spokesman said Saturday's clash was carried out with the co-ordination of the Moro Islamic Liberation Front (MILF).
Manila blames the Abu Sayyaf - which wants a separate Muslim state in the southern islands of the Philippines - and renegade members of the MILF for the beheadings.
The MILF has admitted ambushing a number of marines in July after they entered their territory unannounced but denied being involved in the beheading.
This was the first military offensive on Basilan since the beheadings despite Gloria Macapagal Arroyo, the Philippine president, deploying thousands of troops to the region.
The largely Catholic central government has not launched an all-out attack saying it could pull the MILF, with which it wants to negotiate an end to 30 years of conflict, into the fighting.
Talks between the MILF, which signed a ceasefire with Manila three years ago, have not proceeded for nearly 12 months but are set to resume next week in Malaysia.
The government has vowed to destroy the Abu Sayyaf, which is blamed for a series of beheadings and kidnappings as well ass the 2004 bombing of a ferry off Manila that killed more than 100 people.