Armed guerrillas holding a school in southern Russia allowed two dozen young children and their mothers to flee to safety Thursday but refused to release hundreds of other hostages, as this small town near Chechnya settled into a tense stalemate punctuated by gunfire.

Dramatic scenes of near-naked babies being carried to freedom by camouflage-clad soldiers did little to alleviate the growing fear among relatives of the remaining hostages two days into the standoff. Senior officials said little progress had been made in securing an end to the siege, but at 7:30 a.m. Friday talks were to resume after a calm overnight.

The guerrillas refused to allow food or medicine to be sent for the hundreds of trapped children inside Beslan's School No. 1. President Vladimir Putin called the situation "horrible" and pledged to do everything possible to "save the life and health of those who are hostages."

The heavily armed insurgents -- described by officials and people who fled the school as a mix of ethnic Chechens, Ingush, Russians and Ossetians -- are demanding the withdrawal of Russian troops from the nearby separatist republic of Chechnya and the release of guerrillas jailed after a raid this summer in Ingushetia, which borders Chechnya. They have mined the school and threatened to blow it up if the government tries to storm it.

In a sign of Russian authorities' growing concern, Chechen separatist leader Akhmed Zakayev said in an interview that two government mediators called him in London on Thursday night and discussed his possible participation in negotiations, the first overture to the rebel government-in-exile in several years.

The siege capped a week of terror attacks elsewhere in Russia -- the nearly simultaneous downing of two airliners last week and a suicide bombing Tuesday at a Moscow subway station -- that were blamed on Chechen women. The new spasm of terrorism, Putin said, threatens to "explode the fragile balance" in Chechnya and the neighboring Caucasus regions of southern Russia.

Putin, who canceled a trip to Turkey to attend to the crisis, now faces the difficult decision of whether to order troops to storm the school, risking massive casualties, like the 129 patrons who died in a 2002 siege of a Moscow theater, or violate his own long-standing policy and negotiate with terrorists.

The attack on the school, in the region of North Ossetia just west of Chechnya, came at the close of Wednesday's opening-day ceremony, just after 9 a.m., when hundreds of students, teachers and parents were packed into the gym. About a dozen adults were killed in the initial shootout.

Two days into the standoff, confusion remained over the number of hostages, and many relatives here accused the government of deliberately understating the total.

The official tally was reported at 354 Thursday morning by Lev Dzugaev, an aide to the North Ossetian president. Minutes later, local Interior Ministry chief Kazbek Dzantiyev said 400 children and an unknown number of adults were in the building. Parents who were gathered in the local House of Culture said the actual number was far higher, and separatist leader Zakayev said he was told by the government mediators that the total was close to 1,000.

Estimates on the number of guerrillas were similarly uncertain, ranging from 15 to 40, including at least two women wearing explosives.

"When will you stop lying and tell the truth?" shouted a man in the crowd that gathered around Dzugaev at one point. Another man demanded to know, "How are they going to survive without food and water?" He did not get an answer.

Officials have refused to confirm the demands being put forward by the hostage takers, though several sources said the group wanted a pullout of Russian troops from Chechnya and the release of about 30 guerrillas arrested after the raid this summer in Ingushetia.

Russia's state-controlled TV networks have followed the Kremlin's lead, not reporting the demands or the possibility of a higher hostage number than the official total.

The lone positive development for a peaceful settlement came late in the afternoon Thursday when the guerrillas allowed a mediator, former Ingushetia president Ruslan Aushev, to enter the school. He emerged little more than an hour later, at about 4:30 p.m., accompanied by several infants and their mothers.

At least one of the children was naked, held by a distraught woman. Another toddler was carried into a waiting car by a gray-haired military officer, who kissed the child on the cheek before handing him off. A tattooed soldier in a sleeveless camouflage vest ran toward the car with a third, nearly naked child, who was then wrapped in a red-flowered blanket hastily offered by a bystander.

Later, authorities said 26 hostages had been released, though Russian media reported that one woman returned to be with her older children. "This is the first positive step," Dzugaev said. But other officials were less sanguine. "It's not a sign of anything," said Dmitri Peskov, a Kremlin spokesman.

So far, Russians have relied on two mediators -- Aushev, an Afghan war veteran, and Leonid Roshal, a children's doctor in Moscow who played a similar role during the 2002 theater siege there.

"Of course the release of 26 people is a victory, but speaking broadly, it's really so few," Roshal told reporters. From 4 p.m. Wednesday to 3 a.m. Thursday, he was negotiating on the phone with the guerrillas, who refused his entreaties to allow in food and medicine. They also rebuffed a Russian offer to allow them safe passage in return for freeing the children, and they refused to consider swapping child hostages for adult volunteers.

Roshal, who resumed contact with the guerrillas later Thursday, warned that failure to reach a deal would be catastrophic. "In the event of an unfavorable outcome, there will be war," he said. "A war here, in this dangerous region, a war between fraternal peoples."

The overture to Zakayev came in a joint phone call Thursday night from Aushev and Alexander Dzasokhov, president of North Ossetia, Zakayev said. Zakayev represents separatist leader Aslan Maskhadov, who was elected president during Chechnya's de facto independence in the late 1990s. He said he discussed possible ways to include Maskhadov in the negotiation process.

Russian officials publicly seemed to rule out an attempt to retake the building. "There is no alternative to dialogue," Valery Andreyev, the regional head of the Federal Security Service, told reporters. "One should expect long and tense negotiations."

But Russia's recent history with such mass hostage-takings led relatives and security experts alike to fear that the siege would end in mass casualties. By Thursday evening, the military had widened the security cordon around the school, closing off additional blocks of residential housing and positioning tanks near the building.

Those moves came at the end of a long day of frayed nerves in Beslan, and the town was frequently jarred by gunfire and explosions coming from the school. In the afternoon, the guerrillas fired rocket-propelled grenades, setting a car on fire. They did so again overnight Friday, reportedly injuring a police officer.

In the streets of the town of 30,000, many people were openly angry. "They should make concessions," Oleg Karginov, whose niece was in the school, said of the government. But he quickly added about the guerrillas: "They have to be captured. They're just walking meat, not humans. What they've done with these children, even a wolf wouldn't do that to another wolf."

Glasser reported from Moscow.

A Russian officer, followed by a freed mother and child, carries a baby from the school in Beslan, a town in the region of North Ossetia, just west of Chechnya.