In yet another setback, rebel forces in eastern Libya pulled back Friday after a failed advance on the oil town of Brega.
The bitter defeat comes as rebels in western Libya find themselves in a disorganized two-steps-forward, one-step-back offensive that has led their NATO backers to question whether they have the grit to finish what they started.
Battle lines have stagnated in the four-month uprising leaving rebels in control much of the east and pockets in the west, while Qadaffi controls the rest from his stronghold in the capital Tripoli.
As the rebels find their fervor tested and faces blackened in the past week, Libyan strongman Muamarr Qadaffi called on his followers to strike back at NATO.
Broadcasting to a rally of thousands held Thursday in the town of al-Ajaylat near the Tunisian border, Qadaffi tried to whip them into a frenzy to take up arms to attack the nation's 'enemies.'
"Crashing waves of angry masses, rising to the challenge with high heads and loud voice saying we will never surrender. Smash NATO! We are courageous, we are mujahideen!" Libya's eccentric dictator yelled in an address also broadcast on national television.
Qadaffi has reportedly vowed to 'blow Tripoli up' should it fall into rebel hands.
The failed rebel attack on the strategic oil city of Brega came just before a key meeting in Istanbul over the future of Libya, with delegates from more than 30 countries discussing Friday how to end the conflict.
The Obama administration is preparing to strengthen ties with the Transitional National Council once it presents detailed plans for a democratic government in the belief the Council will govern a post-Qadaffi Libya.
But United States NATO ally France has clearly broken ranks and opened a direct dialogue with Qadaffi, leading many observers to suggest France believes Qadaffi may not be leaving the west anytime soon.
Turkey, which is co-chairing Friday's meeting together with the United Arab Emirates, is calling for an immediate cease-fire and providing water, food and fuel to strife-torn cities.
Turkey also wants NATO to stop targeting ground forces to prevent civilian casualties before the start of the holy Muslim month of Ramadan in August, which would almost certainly stall any hopes the rebels have of retaking the initiative.
The attack on Brega, a key oil installation and long a rebel goal, may have been an attempt to strengthen the rebels' position ahead of talks.
Abdel-Hamid Badein, a rebel fighter, said the rebels had to withdraw to their previous positions after they were repulsed in Thursday's attack.
Libyan government spokesman Moussa Ibrahim condemned the attack and alleged NATO's close coordination with the rebels in violation of the alliance's UN mandate to protect civilians.
"It was a full scale attack and it was heavy and merciless," Ibrahim said. "We were successful in combating this attack and we did defeat both NATO and the rebels and we killed many rebel forces and captured a good number of them as well."
NATO is enforcing a no-fly zone over Libya, but has taken advantage of permission to 'protect civilians' to strike Qadaffi forces. It has rejected allegations that it has exceeded its mandate.