Thousands flee after troops, rebels clash in Philippines

* Army says six missing soldiers found dead

* Muslim rebels free one soldier

* President calls generals in to assess situation (Adds death toll rises to 28, Aquino summons generals for talks)

MANILA, Oct 19 (Reuters) - Deadly fighting between Philippine soldiers and a group of Muslim separatists on a southern island has forced thousands of people to flee their homes and created a new problem for stalled peace talks to end the long-running insurgency.

Nearly 30 people were killed when army commandos clashed with the Moro Islamic Liberation Front (MILF) fighters near al-Barka town on Basilan island on Tuesday, and both sides accused each other of breaking a seven-year truce.

Lieutenant-General Arturo Ortiz, the army commander, said six soldiers reported missing had been found dead, while another soldier taken captive had been handed over to local officials.

"Our running count is 19 soldiers killed, 13 wounded and one more missing," Ortiz said on Wednesday, adding the rebels lost nine fighters and one was wounded.

Al Rasheed Sakalahul, Basilan province vice governor, said the deployment of more troops, backed by helicopters and armoured vehicles, had forced residents to flee their homes and farms.

"They fear getting caught in a crossfire if another encounter erupts," Sakalahul told reporters. Government officials said nearly 3,500 people had been displaced.

President Benigno Aquino has summoned senior generals for a meeting on Friday to assess the security situation in the south.

The MILF has been negotiating with the government to end more than four decades of conflict that has killed 120,000 people, displaced 2 million and hobbled growth in the poor but resource-rich Muslim areas in the south of the country.

MILF chief negotiator Mohagher Iqbal told Reuters his group was concerned by a pattern of ceasefire violations by the military because it could threaten the negotiations.

The military, however, said it did not violate the ceasefire on Tuesday as it was chasing a kidnapping gang, accusing the MILF of joining the fray. The rebels claimed the soldiers provoked them when they attacked guerrilla positions on Basilan.

"The trust and confidence between the two sides are getting thinner," Iqbal said, adding he feared an escalation of violence that could further stall the talks.

But the government tried to play down the latest fighting.

Marvic Leonen, the government's chief peace negotiator, said the clash on Basilan was a "misencounter" between soldiers and rebels, describing it as an isolated incident.

"The armed confrontation was not intended by both government and the MILF," he said.

Leonen added that the two sides were preparing to resume talks next month in Kuala Lumpur.

Malaysia is brokering the peace talks. The MILF is seeking a sub-state in the south of the mainly Catholic state, and in August rejected Manila's proposal to resolve the dispute.

(Reporting By Manny Mogato; Editing by John Mair and Sanjeev Miglani)