Troops find hostage 'slaughterhouses' in Falluja
Coalition forces say 70 percent of city is under control
Marines rush to a helicopter to evacuate a person injured in Wednesday's fighting in Falluja.
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Watch for CNN correspondents' frequent updates on the situation on the ground: live reports from the U.S.-Iraqi offensive in Falluja.
U.S. Iraqi forces say they control 70 percent of Falluja.
Relatives of Ayad Allawi are kidnapped.
U.S. troops advance into the heart of Falluja .
FALLUJA, Iraq (CNN) -- Iraqi troops retaking the city of Falluja have found hostage "slaughterhouses" where people were held captive and beheaded, an Iraqi military official said Wednesday.
Soldiers found CDs labeled "beheading of ..." and showing the decapitations of hostages.
Black clothing and masks worn by the kidnappers when they made the videos were found, along with banners hoisted in the background, according to Iraqi and U.S. military officials.
Soldiers said it was apparent that numerous killings had taken place there.
Maj. Gen. Abdul Qader, commander of Iraqi forces in the battle, said he was unsure whether the hostage records included the names of kidnapped British aid worker Margaret Hassan or French journalists Christian Chesnot and Georges Malbrunot.
In Baghdad, meanwhile, a car bomb detonated Wednesday near an emergency police patrol killed at least seven people and wounded three police officers, said Col. Adnan Abdul Rahman, spokesman for Iraq's Ministry of Interior.
And a U.S. soldier was killed and another is listed in stable condition after an Army 1st Infantry patrol was hit by a roadside bomb near Balad, north of Baghdad early Wednesday, a military statement said.
Resistance lighter than expected
Military officials in Falluja said Wednesday that combined U.S. and Iraqi forces have taken control of about 70 percent of the city on the third day of the ground offensive, including key buildings.
Troops had expected to encounter heavy urban fighting in their push to clear the city of insurgents before elections in January. So far, however, they have found resistance to be lighter than anticipated.
Troops have seized the mayor's office, as well as several mosques and bridges, military officials said.
An estimated 10,000 U.S. soldiers and Marines, along with about 2,000 troops from Iraq's new army, have been running into small pockets of fighters as they fight their way through the city.
The offensive launched Sunday is dubbed Operation New Dawn and targets an estimated 2,000 to 3,000 insurgents. A senior Pentagon official told CNN more than 500 insurgents have been killed in the fighting. (Gallery)
Eleven U.S. troops and two Iraqis have been killed since fighting began, officials said Wednesday. Nine Iraqi soldiers and an unknown number of Ministry of Interior personnel have been injured.
One of the Army's most senior enlisted soldiers -- Command Sgt. Maj. Steven Faulkenburg, 45, of Huntingburg, Indiana -- was killed Tuesday by a gunshot wound to the head while conducting combat operations in Falluja, Army sources said.
Strongholds in and around the city have been destroyed, including defensive positions on the outskirts of the city. Combat units report finding several weapons and explosives caches, along with car bombs and other homemade explosives.
Military officials said two mosques have been searched because weapons were believed to be hidden inside. In an effort to preserve the cultural sensitivity of mosques, only Iraqi forces are sent inside.
U.S. military policy is that, when mosques are used as firing positions, their sanctity is forfeited. "Today, we saw again the terrorists' practice of abusing public buildings and religious sites to carry out their attacks against Iraqi and multinational forces," said Thair al-Nakib, spokesman for interim Iraqi Prime Minister Ayad Allawi.
Falluja's Khilafa al-Rashid mosque was being used as a base for military operations, he said. After small-arms fire failed, precision airstrikes were used to secure the area.
Limited amnesty offered
Falluja is considered an insurgent command-and-control center for the rest of the country and a base for Jordanian militant Abu Musab al-Zarqawi's terror network. (Falluja map)
The city was sealed off Sunday, but many insurgents could have slipped out before then, Lt. Gen. Thomas Metz said Tuesday. As for al-Zarqawi, Metz said, "I think it would be fair to assume that he has left."
Allawi has called for insurgents to lay down their weapons.
"Several groups have approached the government in the last 24 hours to indicate their willingness to cooperate and to surrender to government authority," said al-Nakib. "The government is willing to offer these groups amnesty, provided that they have not committed major crimes."
The operation marks the third attempt this year to subdue Falluja. Earlier operations in the city -- by U.S. forces and by a short-lived Iraqi force called the Falluja Brigade -- failed to quell the insurgents.
Allawi relatives kidnapped
At least two members of Allawi's extended family were abducted at gunpoint from their home in Baghdad, amid conflicting reports from government officials and sources close to the family.
A group called Ansar al-Jihad claimed responsibility for the kidnapping on a Web site, saying there were three hostages.
The prime minister's office Wednesday said it was aware of the abduction of two family members -- Allawi's cousin, Ghazy Allawi, 75, and his cousin's daughter-in-law. The office said Ghazy Allawi has no political interest and did not work for any governmental facility. (Full story)
Bush hears battle report
In Washington, President Bush said he had spoken with Gen. George Casey, the head of the multinational force in Iraq, who reported "things are going well in Falluja."
The president noted that the situation is "tough right now in Iraq because there are people that are willing to commit violent acts to stop elections."
But he said that same atmosphere did not deter people in Afghanistan from turning out to vote recently, and he was confident the Falluja population would take part in the elections planned for January.
And State Department spokesman Richard Boucher $89.12 million for 99 specific U.S.-sponsored projects scheduled to begin in Falluja before the end of January.
"Reconstruction work is not possible while the fighting is going on or while the insurgents have been in charge of the town," Boucher said. "But once it's back in government hands, we'll be able to get on with these projects very quickly."
From CNN producers Kianne Sadeq, Kevin Flower, Ayman Mohyeldin, Elise Labott and Caroline Faraj and Baghdad Bureau Chief Jane Arraf, embedded with the U.S. Army