BAGHDAD (Reuters) - U.S.-led forces mark the first anniversary of Saddam Hussein's fall on Friday fighting fierce battles with Sunni and Shi'ite Muslim rebels as Iraq plunges into the bloodiest and most chaotic period of the occupation.

On the eve of the anniversary of Baghdad's capture, 14 foreigners were reported kidnapped as new flashpoints flared across the country but seven -- all South Korean evangelical church pastors -- were later freed unharmed.

A previously unknown Iraqi group said it was holding three Japanese hostages and threatened to "burn them alive" unless Tokyo withdrew its troops from Iraq within three days.

Rebels seized two Palestinians with Israeli identity cards, shown on a video tape aired by an Iranian television station, and accused them of spying. A Briton was kidnapped in the southern town of Nassiriya and Canada said a Canadian humanitarian worker had been seized at an unspecified location.

The U.S. military said on Thursday it had suffered six more combat deaths in Iraq over the past 48 hours, bringing to 449 the number of U.S. troops killed in action since the start of the war to oust Saddam.

SHI'ITE MILITIA CONTROLS TWO TOWNS

The top U.S. general in Iraq, Lieutenant General Ricardo Sanchez, acknowledged the southern towns of Najaf and Kut were in the hands of a militia loyal to radical Shi'ite Muslim cleric Moqtada al-Sadr.

U.S.-led forces were locked in open urban warfare in the central Sunni town of Falluja, the Shi'ite shrine city of Kerbala and Abu Ghraib on the western outskirts of the capital, witnesses said.

The upsurge in violence has prompted President Bush's critics, as he campaigns for re-election in November, to suggest U.S. forces face a Vietnam-style quagmire, but Sanchez rejected the comparison.

"I don't see any shadows of Vietnam in Iraq," Sanchez told a news conference, a day after Washington said it might keep combat-hardened troops in Iraq longer than their scheduled tour of duty to help quell the violence.

"We have got Falluja under siege," Sanchez said, but denied U.S. forces were depriving its people of humanitarian supplies.

Up to 300 Iraqis have been killed and at least 400 hurt in the Sunni town in the four days since U.S. Marines began a crackdown on guerrillas, hospital director Rafi Hayad said.

The Marines launched "Operation Iron Resolve" after last week's killing and mutilation of four U.S. private security guards showed the depth of anti-American feeling in Falluja.

POLISH AND BULGARIAN TROOPS IN ACTION

South of Baghdad, Polish and Bulgarian troops battled followers of Sadr in the shrine city of Kerbala, where hundreds of thousands of pilgrims have converged for Arbain, a major Shi'ite religious occasion.

Sanchez said Sadr's Mehdi Army militia controlled the centers of Najaf and Kut, along with police stations and public buildings, while U.S.-led forces held bases outside the towns.

Asked if U.S. troops would be sent to fight the Mehdi Army, he said: "We will do whatever is necessary to defeat Moqtada Sadr's forces wherever they are on the battlefield."

Forty-one American and allied soldiers and hundreds of Iraqis have been killed in this week's new two-front fighting in Iraq.

Previously violence had been largely confined to Sunni areas and Washington had blamed attacks on Saddam supporters and foreign Islamic militants. Iraq's majority Shi'ites had generally been peaceful.

Bush has vowed the violence will not force the United States to retreat from Baghdad or disrupt its planned handover of power to Iraqis on June 30.

But a U.S. opinion poll on Monday showed plunging support for Bush's handling of Iraq and signs of nervousness have emerged among some other countries with troops in the country.

The rash of kidnappings will probably cause more soul-searching among U.S. allies. About 125,000 U.S. troops and some 20,000 from other nations, including Britain, Japan and South Korea, are in Iraq.

"BURN ALIVE" THREAT

Al Jazeera television aired a video tape showing the three Japanese, including a woman, who are being held by a group calling itself the Saraya al-Mujahideen (Mujahideen Brigades). They were in civilian clothes.

"We tell you that three of your children have fallen prisoner in our hands and we give you two options -- withdraw your forces from our country and go home or we will burn them alive and feed them to the fighters," the group said.

A Foreign Office official in London confirmed that Gary Teeley had been missing since Monday. British media said the 37-year-old Briton had been working at a U.S. air base.

Iran's Al-Alam television said the two Arabs with Israeli papers, Nabil George Yaakob Razuq and Ahmed Yassin Tikati, had been seized by a group calling itself Ansar al-Din.

Israeli cabinet minister Gideon Ezra said both men were residents of East Jerusalem, but were not Israeli citizens.