WASHINGTON (Reuters) - President Bush acknowledged the "great costs" of American military deaths from his administration's war on terror during a Memorial Day service on Monday, as the combined U.S. death toll in Iraq and Afghanistan climbed toward the 1,000 mark.

Atop a rainswept hill in Arlington National Cemetery near Washington, the Republican president placed a wreath at the marble tomb of unidentified soldiers killed during the two world wars and in Korea, before bowing his head for a national moment of silence.

He then stood at a podium in the cemetery's marble-columned amphitheater to extol the "decency" and "brave spirit" of U.S. soldiers overseas and describe the Iraq of Saddam Hussein as a terror regime akin to Taliban-ruled Afghanistan, which sheltered Osama bin Laden and his al Qaeda militants.

"The war on terror we're fighting today has brought great costs of its own," Bush said.

"Those who have fought these battles and served this cause can be proud of all they have achieved. And these veterans of battle will carry with them, through all their days, the memory of the ones who did not live to be called veterans," he added.

"This is the loss to our nation," the president said.

Clashes with Sunni and Shi'ite Muslim insurgents in Iraq raised the U.S. death toll there by more than 200 in April and May. The two-month figure compares with the 138 U.S. soldiers who died during the major combat operations in Iraq that Bush declared over on May 1, 2003.

Official Pentagon statistics show 802 U.S. dead and 4,682 wounded in Operation Iraqi Freedom as of Friday morning. Another 122 have died and 310 have been wounded as part of Operation Enduring Freedom, mainly in Afghanistan.

The official figures do not include at least five soldiers in Iraq and four in Afghanistan killed during the weekend.

WAR PRESIDENT

Bush, who avoided combat in Vietnam while serving as a pilot in the Texas Air National Guard, calls himself a war president for his re-election campaign against Democratic presidential candidate John Kerry, a decorated Vietnam veteran.

Kerry made his own Memorial Day visit to the Vietnam Veterans' memorial, where he laid a wreath with the family of a soldier who died in 1976 of battle injuries he suffered in 1968. Kerry had pushed to have the man's name added to the list of 58,000 Vietnam fatalities engraved on the black granite wall.

Arlington is one in a series of war-related appearances for Bush, who spoke on Saturday at Washington's new World War II memorial and will visit France on June 6 for the 60th anniversary of the Normandy invasion.

However, Iraq has become a political liability for the president in recent months, with the approaching June 30 handover to an Iraqi interim government overshadowed by insurgent violence and a scandal over abuse of Iraqi prisoners.

Appearing on stage with embattled Defense Secretary Donald Rumsfeld, Bush lauded the character of U.S. military personnel who he said have made America safer by ending "two terror regimes" and freeing more than "50 million souls."

"Since the hour this nation was attacked, we have seen the character of the men and women who wear our country's uniform," said the president, who has backed Rumsfeld despite calls for the Pentagon chief's resignation over his handling of Iraq.

"We have seen their decency and their brave spirit," he added.

A presidential visit to the Tomb of the Unknowns has long been a U.S. tradition on Memorial Day, a holiday of remembrance dating back to the aftermath of the Civil War.