Aljazeera's correspondent in Falluja, Abd Al-Adhim Muhammad, said exchange of fire in the Golan quarter grew so fierce that troops had to call in helicopter support on Wednesday.
Muhammad said he personally witnessed two US air gunships destroy four homes in al-Mutasim quarter, adding many resistance fighters were now taking cover in the ruined buildings.
Under siege by US marines for more than two weeks, and after 600 Iraqi civilian fatalities, one fighter told Aljazeera some tanks and armoured vehicles had been forced to leave the Golan quarter.
Scholars witness destruction
Sunni Muslim clerics who fled the bloody fighting in urged insurgents to hold on to their weapons and vowed revenge against the US at a gathering of dozens of people in Baghdad on Wednesday.
"We beg God that he will avenge us and foil the plans" of the Americans, said Shaikh Muhammad Abd al-Aziz al-Ani, an imam at a Falluja mosque, who was greeted by shouts of "Allah Akbar (God is Great)".
"They killed all that moved, even the animals. These people are the enemies of mankind," he added, calling on people of "good conscience to act to stop" the bloodshed.
Elsewhere in the restive west, a US helicopter was hit and downed on Wednesday in the village of Um al-Idham, south of Baquba.
Quoting witnesses Aljazeera's correspondent in Baquba said the incident took place at dawn.
"The US forces immediately sealed off the area and removed the wreckage of the helicopter," he said.
Because of the increase in fighting in Falluja, occupation forces have only permitted seven Iraqi families to return to the city.
About 50 families had returned on Tuesday and between 500 and 600 families are still waiting for permission.
However, a family that was permitted to return found US forces had turned their home into headquarters and are using its roof as an observation post.
The family was forced to search for another house, not under attack, after they found themselves homeless in their own city.
On Tuesday, US Defence Secretary Donald Rumsfeld said the chances of a negotiated solution to the mounting battle were "remote" and warned the US military might use more severe weapons.
"Thugs and assassins and former Saddam henchmen will not be allowed to carve out portions of that city and to oppose peace and freedom," Rumsfeld said.
But Iraq's Association of Muslim Scholars added that the Falluja agreement was "accepted by all the fighter groups" and that Rumsfeld's comments represented a fundamental misunderstanding.
The committee added that marines broke the truce by shooting eight Iraqis dead on Tuesday.