By Bate Felix
BAMAKO, Jan 17 (Reuters) - French troops surrounded the Malian town of Diabaly on Thursday, keeping Islamists rebels who had seized it three days ago bottled up while a West African military force took shape.
The French held back from launching a full-out assault on the town as the Al Qaeda linked rebels had taken refuge in the homes of civilians.
"The Islamists are still in Diabaly. They are very many of them. Every time they hear a plane overhead, they run into homes, traumatising the people," said one woman who fled the town with her three children overnight.
France began ground operations against an Islamist coalition grouping al Qaeda's North African wing, AQIM, and the homegrown Ansar Dine and MUJWA militants on Wednesday after six days of air strikes.
President Francois Hollande ordered the intervention in the former French colony on the grounds that the Islamists who had taken over the north could turn it into a "terrorist state" which would pose a threat beyond its borders. They will stay until stability returns, he said.
French forces now total some 1,400 troops, Defence Minister Jean-Yves Le Drian said on Thursday, and their numbers are expected to rise to 2,500.
The vanguard of around 900 Nigerian troops was due to arrive in Mali's capital Bamako on Thursday in the first wave of a 2,000-strong African force to fight alongside the French.
A convoy of armoured vehicles, fuel tankers and ambulances and around 200 soldiers from Mali's eastern neighbour Niger was also positioned at that border, witnesses said.
Regional bloc ECOWAS received a United Nations mandate for an African force in December but a southward advance by the Islamists this month and the subsequent French intervention made them deploy sooner that had been planned.
At least eight West African countries, including Chad, Togo and Nigeria, have promised contingents.
"We have seen in last few days a number of operational troops arriving on Malian soil," a French government official said. "We are in a process of accelerating the process which is the U.N. plan a lot earlier than orginally planned."
Mali's recent troubles began with a coup in Bamako last March that ended a period of stable democratic rule. In the confusion that followed, Islamist forces seized large swathes of the north and imposed a strict rule reminiscent of Afghanistan under the Taliban.
Military experts say France and its African allies must now capitalise on a week of hard-hitting air strikes by seizing the initiative on the ground to prevent the insurgents from withdrawing into the desert and reorganising.
Diabaly is a rural town with a population of about 35,000 people, situated about 360 km (220 miles) from Bamako and near the border with Mauritania, where AQIM has bases.
A spokesman for MUJWA confirmed that their positions in Diabalay had been fired upon but said French forces had not penetrated the town itself.
Diabaly's mayor, Salif Ouedrago, who fled on Wednesday, told Malian state radio: "There were deaths on the side of the jihadists. They buried their dead yesterday."
Meanwhile, the Malian army rushed reinforcements to a town closer to the capital Bamako on Thursday after Islamist fighters were spotted near the border with Mauritania.
"Banamba is in a state of alert. Reinforcements have been sent. Nigerian troops expected to arrive in Bamako today could be deployed there to secure the zone," a senior Malian military source told Reuters.
An inhabitant of Banamba, 140 km (90 miles) from the capital, reported the arrival of soldiers after insurgents were seen in the Boron border area.
With African states facing huge logistical and transport challenges to deploy their troops, Germany promised two Transall military transport planes to help fly in the soldiers.
Britain has supplied two C-17 military transport planes to ferry in French armoured vehicles and medical supplies. The United States is considering logistical and surveillance support but has ruled out sending in U.S. troops.