* Army chief seized power on May 22 after months of turmoil
* Scores of politicians, activists detained
* Army loosens restrictions on former PM Yingluck
* Yingluck's exiled brother Thaksin at heart of crisis (Updates with detail from protest)
By Panarat Thepgumpanat and Paul Mooney
BANGKOK, May 26 (Reuters) - Thai coup leader General Prayuth Chan-ocha said on Monday he had been formally endorsed by the king as head of a military council that will run the country, and warned he would use force if political protests flare up again.
Prayuth seized power on May 22, saying the army would restore order after nearly seven months of sometimes deadly street demonstrations. The military has taken into custody scores of politicians, activists and others.
"Will we go back to where we were before? If you want to do that, I will need to use force and impose the law strictly," Prayuth said in a statement he read on television. "You will have to forgive any tough measures as they are necessary."
He did not set a timeframe for how long the army would stay in power, although he said he hoped to hold elections soon.
The royal endorsement is a significant formality in Thailand, where the monarchy is the most important institution.
But Prayuth's address would have provoked conflicting reaction in a country polarised by nearly a decade of rivalry between the royalist establishment, of which Prayuth is a member, and Thaksin Shinawatra, a populist tycoon who broke the political mould.
Prayuth, wearing a formal white dress uniform, said he would set up a council of advisers but gave no details on the form of a government that will run the country under his military junta, the National Council for Peace and Order.
"The country needs a prime minister," he said.
The military ousted the remnants of a government that had been led by Prime Minister Yingluck Shinawatra, Thaksin's sister, until she was removed by a court on May 7 for abuse of power. Thaksin was ousted as premier in a 2006 coup.
The military has taken over with a heavy hand, throwing out the constitution, dissolving the Senate and censoring the media. Anyone who insults the monarchy or violates the military's orders will be tried in a military court.
Despite warnings, small crowds of people voicing opposition to the coup have been gathering daily in Bangkok since the takeover, as well as in the north and northeast, strongholds of the ousted government. There have been no serious clashes.
On Monday, several hundred people gathered at Bangkok's Victory Monument where about 1,000 protesters massed on Sunday.
Some shouted "we want elections" and "coup get out", others held up signs saying "we want democracy", a Reuters reporter said.
Police and soldiers turned in force to block the protesters and there was jeering and some scuffles but no serious trouble. Soldiers in a van with a loudspeaker urged people not to join the protesters, saying they were being paid, and blamed foreign media for trying to damage the country.
While the protests are a nuisance for the army, a more serious threat would be armed resistance from Thaksin's "red shirt" loyalists. They have always threatened to fight a coup but with so many of their leaders detained or in hiding, activists say they have no plan for opposition.
Authorities seized weapons and detained activists in the northeast last week. On Monday, an army ranger was killed in Trat province, near the Cambodian border, in a clash with suspected pro-Thaksin gunmen during a search, the army said.
YINGLUCK ALLOWED HOME
Earlier on Monday, Suthep Thaugsuban, a former pro-establishment politician who led protests that undermined Yingluck's government, was released on bail, his lawyer said. He had been held since the coup.
The army has also allowed Yingluck to go home, although she remains under military supervision with soldiers guarding her residence, a military official said on Sunday.
But the easing of restrictions on Yingluck will do little to dispel concern among her supporters that the military is intent on a crackdown for reasons other than simply restoring order.
Thaksin, seen as the real power behind his sister's government, was ousted in 2006 after his big-spending policies had won him the passionate support of the poor but the animosity of the establishment, who saw him as a corrupt, authoritarian opportunist and a threat to the old order.
The upstart former telecommunications tycoon, who refused to conform with the establishment's ways, was also accused of being disrespectful to the monarchy and even a closet republican, which he denied.
The former leader, who has lived in self-exile since a 2008 graft conviction, said on Twitter he was saddened by the latest events, and called on the army to treat everyone fairly.
The crisis between the establishment and Thaksin comes amid anxiety over the issue of royal succession. The king, the world's longest-reigning monarch, is 86 and spent the years from 2009 to 2013 in hospital.
Crown Prince Vajiralongkorn does not command the same devotion as his father, but some Thaksin supporters have recently been making a point of showing their loyalty to the prince.
One Thaksin ally, ousted Education Minister Chaturon Chaisang, said he expected the military to take steps aimed at sidelining once and for all Thaksin, his family and his allies, and blocking forever his formidable political machine, which has won every election since 2001.
"Any election after that would be meaningless," Chaturon told Reuters by telephone on Sunday, referring to changes he expects the military to implement.
For now, the military is focusing on ending dissent and getting the economy back on track.
Shares in building contractors jumped more than 3 percent on Monday on expectations the military government would speed up disbursements for infrastructure projects that were put on hold during the months of political unrest.
Among them, Italian-Thai Development Pcl, the country's largest construction firm, rose 0.5 percent even though the army has summoned its president, Premchai Karnasuta, to appear on Monday, along with 37 others including political associates and big business allies of Thaksin.
Also on Monday, the military officer overseeing the economy met senior economic civil servants. (Additional reporting by Amy Sawitta Lefevre, Khettiya Jittapong and Aukkarapon Niyomyat; Writing by Robert Birsel; Editing by Alan Raybould, Alex Richardson and Nick Macfie)