Libya's civil war collapsed, and rebels said the increasingly bloody siege of the city of Misrata by Muammar Gaddafi's troops made talk of a ceasefire meaningless.
The Red Cross said it was opening a Tripoli office and would send a team to Misrata to help civilians trapped by fighting, but one of Gaddafi's ministers warned any aid operation involving foreign troops would be seen as a declaration of war.
Rebel leader Mustafa Abdel Jalil said after talks with the AU delegation in Benghazi in the rebel-held east on Monday:
"The African Union initiative does not include the departure of Gaddafi and his sons from the Libyan political scene, therefore it is outdated." Libyan leader Muammar Gaddafi's son Saif quickly dismissed the idea of his father stepping down.
"We want new blood, that's what we want for Libya's future. But to talk of (Gaddafi) leaving, that's truly ridiculous," he told French news channel BFM TV.
"If the West wants democracy, a new constitution, elections, well, we agree. We agree on this point but the West must help us to provide a propitious climate. But all these bombings, this support given to rebel groups, all that is counter-productive."
Libyan television said the "colonial and crusader aggressors" hit military and civilian sites in Al Jufrah district in central Libya on Monday.
Rebels in the coastal city of Misrata, under siege for six weeks, scorned reports that Gaddafi had accepted a ceasefire, saying they were fighting house-to-house battles with his forces, who fired rockets into the city.
Western leaders also rejected any deal that did not include Gaddafi's removal, and NATO refused to suspend its bombing of his forces unless there was a credible ceasefire.
NATO Secretary-General Anders Fogh Rasmussen told a Brussels news briefing that Gaddafi's government had announced ceasefires in the past, but "they did not keep their promises."
"Any future proposal that does not include this, we cannot accept," he said, accusing Gaddafi of bombing, shelling and shooting civilians.
A resident of Misrata told Reuters there was heavy fighting on the eastern approaches and in the center.
Rebels told Reuters that Gaddafi's forces had intensified the assault, for the first time firing truck-mounted, Russian-made Grad rockets into the city, where conditions for civilians are said to be desperate.
Human Rights Watch accused Gaddafi's forces of indiscriminate attacks on civilians in Misrata which violated international law. It said about 250 people had died.
At the front outside the eastern rebel-held town of Ajdabiyah, rebels buried the charred bodies of Gaddafi troops killed in air strikes and said they were advancing westwards.
The International Committee of the Red Cross (ICRC) is already deployed in Libya's rebel-held eastern territory, where it has supplied hospitals, distributed food and visited government soldiers captured during the conflict.
Speaking in Tripoli alongside a government spokesman, its regional head Jean-Michel Monod said his team had been officially invited to the capital.
"Now we will officially be here open for business," he told reporters. "Of course it was high time as a neutral, impartial and independent humanitarian organization that the ICRC would come here as well to conduct discussions with the authorities."
Libyan Social Affairs Minister Ibrahim Zarouk al-Sharif said some aid operations had been used as a cover to supply rebels.
"If humanitarian aid is brought through humanitarian organizations who specialize in this kind of work then we would welcome it. But if it comes with a military face then we won't accept it, it's basically a declaration of war and might lead to a much bigger conflict."
At talks in Luxembourg, Italy quarreled with other European Union governments on how to handle thousands of migrants fleeing the turmoil in Libya and elsewhere in north Africa, while the EU executive urged the bloc to do more for the refugees.
NATO attacks outside Ajdabiyah on Sunday helped break the biggest assault by Gaddafi's forces on the eastern front for at least a week. The town is the gateway to the rebel stronghold of Benghazi 150 km (90 miles) north up the Mediterranean coast.
Opposition fighters have been overwhelmed by Gaddafi's firepower in western Libya, close to his base of Tripoli, but are increasingly using guerrilla tactics to weaken his hold.
Tripoli residents said there had been several attacks on army checkpoints and a police station in the last week and gunfire can be heard at night.
Gaddafi's former foreign minister Moussa Koussa, speaking in Britain where he fled last month, called on "everybody, all the parties, to work to avoid taking Libya into a civil war."
"This will lead to bloodshed and make Libya a new Somalia," he told the BBC. "More than that we refuse to divide Libya. The unity of Libya is essential to any solution and any settlement in Libya."
(Additional reporting by Alex Dziadosz in Ajdabiyah, Michael Georgy in Benghazi and Christian Lowe in Algiers; writing by Andrew Roche; editing by Michael Roddy)