* ISIL abandons town straddling Aleppo-Damascus highway
* Fighting among rebel factions raging this month
* Has weakened insurgency against Syrian president (Adds fighting in Aleppo)
By Alexander Dziadosz
BEIRUT, Jan 17 (Reuters) - Syrian rebels ousted an al Qaeda-linked faction from one of its northwestern bastions on Friday, activists said, a serious blow to the group after two weeks of infighting that has undercut the insurgency against President Bashar al-Assad.
But in a sign the internecine conflict was far from over, the Islamic State of Iraq and the Levant (ISIL) retook control of a town on the Turkish border after losing it to rival rebels for several hours, a monitoring group said.
Rebels from Islamists to relatively secular moderates have been fighting the al Qaeda-linked ISIL in the worst rebel-on-rebel violence since Syria's conflict began in March 2011.
The fighting since the start of January has killed over 1,000 people, according to Syrian Observatory for Human Rights monitors. The fissures within rebel ranks have helped Assad's forces claw back territory around the northern commercial hub of Aleppo and are likely to increase the government's leverage at peace talks starting in Geneva on Jan. 22.
On Friday, the Observatory and activists said ISIL had pulled out of the northern town of Saraqeb, strategically important because it straddles highways connecting Aleppo, the capital Damascus and Assad's coastal stronghold of Latakia.
"They burned their cars before the withdrawal and pulled out after covering fire from a brigade loyal to them," the Britain-based Observatory said.
Rival insurgents - including many from the Islamic Front, a large alliance of some of Syria's most powerful rebel groups - had been fighting to take the town for days and moved tanks and machinegun-mounted pickups against ISIL about a week ago.
A Saraqeb-based activist said ISIL's position weakened when an allied brigade pulled out to protect the nearby town of Sarmin, also under siege by the Islamic Front.
A local commander of the Nusra Front - another al Qaeda-aligned group that has clashed with ISIL in some areas - said fighters from Nusra and from the Syrian Revolutionaries Front faction would take over military sites and checkpoints while ISIL and the Islamic Front would withdraw.
"The decision wasn't up to them," the commander said via Skype. "This was a good result. Stopping the clashes is always the best outcome. We in Nusra are not picking any side. We are against the aggressor in each of these incidents and unfortunately both sides are attacking each other."
The claim of an agreement made by the Nusra commander was repeated by the Saraqeb-based activist, but other activists disputed it and it was not immediately possible to verify it independently.
In another setback for ISIL, competing rebels seized several areas from the jihadis southwest of Aleppo, including Urem al-Sughra and Reef al-Mohandiseen, the Observatory said.
At least 12 ISIL fighters were killed and 20 surrendered in Reef al-Mohandiseen after mediation from the Nusra Front, the Observatory said. All of the fighters who surrendered were foreign and most were Turkish, it added.
However, ISIL fighters bolstered by reinforcements from countryside east of Aleppo recaptured the town of Jarabulus on the northern border with Turkey from rival insurgents, according to the Observatory.
ISIL bombed to rubble a number of houses belonging to other rebels and that at least 22 fighters from brigades opposed to ISIL were killed, five of whom after being taken prisoner.
The internal rebel fighting broke out in earnest at the start of January after months of increasing tensions.
Local resentment toward ISIL, a reinvigorated version of al Qaeda in Iraq, had been growing over their kidnapping and killing of opponents and attempts to impose an uncompromising interpretation of Islamic law in territory under their control.
ISIL, which draws strength from a core of battle-hardened foreign Islamists, also angered fellow rebels by seizing territory from rival groups. But the group's loss of Saraqeb is unlikely to bring the fighting much closer to an end.
ISIL still controls large amounts of territory across northeastern Syria including Raqqa, the only major city under full rebel control.
The group has fended off rival advances with a campaign of car bombs and suicide attacks. ISIL detonated four car bombs against its opponents on Thursday alone and at least one on Friday, according to the Observatory.