* Court meets at prison where Mubarak is held
* Egypt already in turmoil after army ouster of Mursi
* West reviews aid to Egypt in light of bloodshed (Recasts with court session starting)
By Lin Noueihed and Tom Perry
CAIRO, Aug 21 (Reuters) - A court convened in a Cairo jail on Wednesday to consider a petition for the release of Hosni Mubarak, the deposed leader of a nation gripped by turmoil, seven weeks after the army toppled his elected successor Mohamed Mursi.
At least 900 people, including 100 soldiers and police, have been killed in a crackdown on Mursi's Muslim Brotherhood in the past week, the bloodiest civil unrest in Egypt's modern history.
The United States and the European Union are both reviewing aid to Egypt in light of the bloodshed, but Saudi Arabia, a foe of the Brotherhood, has promised to make up any shortfall.
Security sources said the court had met at Tora prison, where Mubarak is being held, to review a legal petition demanding freedom for the man who ruled for 30 years until he was overthrown as uprisings swept the Arab world in 2011.
Mubarak is still being retried on charges of complicity in the killing of protesters during the revolt against him, but he has already served the maximum pre-trial detention in that case.
The court could remove the last legal ground for his imprisonment in connection with a corruption case, following a similar decision in another corruption case on Monday.
Although at 85 Mubarak probably has no political future, his release would be seen by many in the Arab world as rehabilitation of an old order of six decades of rule by military men - and even a reversal of the 2011 pro-democracy uprising that brought him down.
The generals ousted Mursi, Egypt's first freely elected leader, on July 3, saying they were responding to the will of the people following vast demonstrations demanding his removal.
They have installed an interim administration to oversee a roadmap they say will lead Egypt back to democracy.
The authorities now portray their quarrel with the Muslim Brotherhood, Egypt's best-organised political force, as a fight against terrorism and are jailing its leaders, including its "general guide", Mohamed Badie, detained in Cairo on Tuesday.
Saudi Arabia and the United Arab Emirates, which along with Kuwait have promised Egypt $12 billion in aid since Mursi's overthrow, have frowned on Mubarak's detention all along. Arab diplomats said the conservative Gulf states had lobbied for the release of a man they once valued as a strong regional ally.
Mubarak's trial, when he appeared in a courtroom cage, and his jailing also affronted some Egyptian officers. One colonel, who asked not to be identified, said the treatment of the former supreme military commander had "tarnished the army's image".
The United States, a close ally of Egypt since it signed a peace treaty with Israel in 1979, said on Tuesday that the crackdown on protesters could influence U.S. aid. It denied reports it had already suspended assistance.
At issue is the future of about $1.23 million in U.S. military assistance and $241 million in economic aid to Egypt. Most of the military aid is spent buying and maintaining American weapons.
EU foreign ministers meet in Brussels on Wednesday to discuss how the 28-nation bloc might use its economic power to promote an end to Egypt's conflict, in which it has sought to mediate.
They are likely to tread carefully, mixing expressions of concern over bloodshed, with limited, if any, changes in a 5 billion euro ($6.7 billion) aid package promised to Egypt last year, diplomats in Brussels said.
Western nations were uneasy during Mursi's year in power, when he assumed extraordinary powers to ram through an Islamist-tinged constitution.
Washington has not denounced the army takeover as a coup, which under U.S. law would force a suspension of aid. The ensuing bloodshed, however, has dismayed the West.
U.S. Senator John McCain, a former Republican presidential nominee who has emerged as a strong advocate of suspending aid, said: "The slaughter of hundred of Egyptians in the street is appalling to all of us.
"Now we should expect in return for our aid that the generals who are now running the country schedule a change in the constitution, schedule elections as soon as possible and the installation of a government that is representative of the people. The present government is representative of no one."
The arrest of Badie, the Brotherhood's leader, is part of a wave of detentions among the upper echelons of the organisation.
Murad Ali, a media adviser to the Brotherhood's political party, and Safwat Hegazy, a fiery preacher, were arrested while trying to flee the country, state media reported on Wednesday.
The Brotherhood said the crackdown would prove futile.
"The putschists think that arresting the leaders of the Muslim Brotherhood and marring their image in the media will make Egyptians bow and give in to the coup," it said.
"They have killed thousands, wounded thousands, arrested thousands but the (people) are continuing in their peaceful revolution, rejecting the coup and military rule."
Badie was charged in July with incitement to murder in connection with protests before Mursi's removal and is due to stand trial on Aug. 25 along with his two deputies.
On Tuesday, the state prosecutor ordered him detained for 30 days on the charges of incitement to killing during anti-Mursi protests in November and demonstrations in Cairo last month.
Footage released to local media showed the bearded leader sitting grim-faced in a grey robe near a man with a rifle following his detention overnight on Tuesday - images that seemed intended to humiliate the Brotherhood chief.
The Islamist group, founded in 1928, used its organisational muscle to secure victory for Mursi in last year's presidential election. It says it has about a million members among Egypt's 85 million people, as well as offshoots across the Arab world. (Additional reporting by Cairo bureau, Justyna Pawlak in Brussels, and Lesley Wroughton and Patricia Zengerle in Washington; Writing by Alistair Lyon; Editing by Michael Georgy and Peter Graff)