"The Palestinian refugees are not being treated properly by Lebanon"
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Troops also destroyed sniper nests on the northern and eastern edges of the camp after seizing three key positions.
A Lebanese military statement said some fighters had fled the frontline and sought refuge deep in the camp, "taking civilians as human shields".
The army said it was "tightening the noose" and urged Palestinians not to shelter fighters.
A statement posted on a website frequently used by al-Qaeda urged fighters in Lebanon to defend Fatah al-Islam.
"Islamists, rise up and aid your brothers in Nahr al-Bared. This is your religious duty," said the statement signed by Mohamed Hakaima, a known Qaeda-linked figure.
Earlier, Zeina Khodr, Al Jazeera's correspondent in Lebanon, reported that buildings had collapsed under heavy shelling.
Residents said they did not have electricity or water, and medical aid personnel were unable to enter the camp.
Al Jazeera's Mike Hanna, reporting from Beirut, said Abbas Zaki, the Palestine Liberation Organisation (PLO) representative in Lebanon, met Fuad Siniora, the prime minister, in an attempt to resolve the impasse.
Zaki said that the humanitarian situation was "desperate" as corpses continued to decay.
He urged the fighters to surrender in an effort to end the fighting.
In a show of support by the PLO, he said that what was affecting the Palestinians was also affecting the Lebanese people, and that the PLO was prepared to do all it can to end the violence.
Khodr quoted Gahzi al-Aridi, the minister of information, as vowing that the Lebanese army would not be held hostage by Fatah al-Islam fighters.
|Zaki, right, has urged Fatah al-Islam |
fighters to surrender [EPA]
Elias Hanna, a Lebanese military expert, told Al Jazeera that it was still unclear whether the Lebanese army would conduct a limited or full military incursion inside the camp.
He said the army would have to assess the objectives of this operation. "The area within the camp is small, like matchboxes, and it would not be easy to manoeuvre heavy vehicles."
He said that Lebanese special forces have the necessary expertise, but lack "situational awareness" as they have not been inside the camp before.
The Lebanese army has been massing around the camp but has not entered it as part of a 1969 agreement that prevents the army from entering Lebanon's 12 Palestinian camps.
Lebanon's government stands firm in its position that it wants Fatah al-Islam to surrender, while the fighters refuse to give themselves up, Zeina Khodr said.
The conflict is Lebanon's worst internal fighting since the 1975-1990 civil war. So far it has killed at least 83 people, including 34 soldiers, 29 Fatah al-Islam fighters and 20 civilians.
The government is demanding that the men surrender, and the authorities have already charged 20 captured members of the group with "terrorism".
The charges carry the death penalty.
Lebanon's government has given Palestinian leaders in Lebanon a chance to find a way out of the two-week stand-off because it fears the fighting could spread to other refugee camps.
More than 25,000 of the Nahr al-Bared's 40,000 Palestinians have fled to the nearby Badawi camp, where humanitarian organisations have been carrying out relief work.
Members of Lebanon's anti-Syrian cabinet have described Fatah al-Islam of being a tool of Syrian intelligence, though Damascus denies denies this and says its leader, Shaker al-Abssi, is on Syria's wanted list.
Al-Abssi has said he follows al-Qaeda's ideology, but has no direct links to Osama bin Laden's network.