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By Gopal Sharma

KATHMANDU, Feb 26 (Reuters) - Nearly seven years after a popular king and almost all his family were gunned down at a dinner party, Nepal's former royal palace opened as a museum on Thursday with the site of the massacre as an exhibit.

King Birendra, Queen Aishwarya and seven other royals were killed reportedly by the drugged and drunk Crown Prince Dipendra, amid a row over his choice of future wife. He later turned the gun on himself, according to a government inquiry.

The sprawling red-brick and pink pagoda-roofed Narayanhiti palace, in the heart of the Nepali capital, was turned into a museum after Nepal's last king Gyanendra vacated it eight months ago.

"The opening of the palace as a museum symbolises the victory of the people in their long struggle against feudalism," Maoist Prime Minister Prachanda said at the opening.

The main hall in the palace, once used to receive ambassadors and ministers, saw Nepalis invited for the opening crowding in to take a look at its crystal chandelier and two mounted rhino heads flanking a stained glass window.

The building where the royal family was massacred was demolished and only a small wall stands in its place. The walls of another building nearby, though, still bear bullet holes from the shooting.

"I feel it very bad when I go to the place where the massacre took place," said Damodar Basnet, who worked at the palace for twelve years. "I feel like crying when I remember that incident."

Nepalis were also eager to see the king's bedroom, dining halls, guest rooms and various royal artefacts.

A 57-year-old sweeper, Badelal Chyami, said: "Earlier it was accessible only for the kings and big people. Now even ordinary people can see it."

The massacre was a turning point in Nepal's history as it pushed the king's unpopular brother Gyanendra to the throne. The new king's absolute rule began to crumble after deadly protests in 2006 that brought the Maoists into the political mainstream.

The former rebels, who began a ten-year insurgency in 1996, won a surprise election victory last year and quickly abolished the 239-year-old monarchy.

More than 13,000 people were killed in Nepal's civil war. (Editing by Matthias Williams and Valerie Lee)

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