By Imtiaz Shah

KARACHI, Oct 17 (Reuters) - Billboards bearing iconic images of Benazir Bhutto, smiling beneath a trademark white scarf, loomed over downtown Karachi on the eve of the former prime minister's return to Pakistan after eight years of self-exile.

The leader of the country's biggest opposition party, the Pakistan People's Party (PPP), has refused to be put off by requests from President Pervez Musharraf to delay her return, or by threats of assassination from Pakistani Taliban fighters.

"Everything is ready -- the people are ready, I am ready and I am on schedule," Bhutto said from Dubai in an interview with Britain's Sky Television on Wednesday.

"I don't think about the risk of assassination," said Bhutto, adding that she expected security to provide jamming devices to stop any bomb being activated by mobile telephones during Thursday's homecoming.

Despite being out of power since 1996, Bhutto, 54, remains one of the most recognisable women politicians in the world, having been prime minister of Pakistan twice.

She became the first female leader of a Muslim nation in 1988, following the mysterious death in a plane crash of military dictator Mohammad Zia-ul-Haq.

General Zia overthrew and hung her father, Zulfikar Ali Bhutto, Pakistan's first popularly elected prime minister a decade earlier.

Excitement ahead of Thursday's homecoming was clearly evident in Pakistan's biggest city as youths on motorcycles zipped through suburbs with PPP pennants aloft, and party leaders predicted that a million people will turn out to greet her.

An old man wearing a voluminous white turban proudly carried a red, black and green PPP banner at the head of one of many bands of Bhutto supporters entering Karachi's northern outskirts from villages in the flat, arid hinterland of Sindh province. MUSHARRAF ON THE ROPES

The timing of Bhutto's return is awkward for General Musharraf, who sees her as both a rival and potential ally after national elections due in early January.

The United States is believed to have quietly encouraged an alliance between Musharraf and Bhutto to keep the leadership of nuclear-armed Pakistan both moderate and pro-West.

In the capital Islamabad, the Supreme Court reconvened on Wednesday a hearing on challenges to General Musharraf's right to have stood for re-election while still army chief in a vote he won easily on Oct. 6.

The bench hearing the case has been enlarged to 11 judges, and proceedings are expected to drag on. Musharraf, whose current term expires on Nov. 15, has been barred from claiming five more years in power until the court decides.

Though he has said he will step down as army chief if re-elected, there is speculation that Musharraf will invoke emergency powers or martial law if the court blocks him.

Opposition lawyer Tariq Mehmood was not optimistic that the Supreme Court would rule against Musharraf, although the court has been regarded as hostile since the president's failed attempt to oust Chief Justice Iftikhar Chaudhry in March.

"We should not expect anything against Musharraf. It seems difficult," Mehmood told Reuters outside the court. "But if there's law, if there's a constitution in the country, as they claim, there's no option except disqualification."

Bhutto has gambled losing support by holding a dialogue with a general who came to power in a coup eight years ago.

Musharraf's popularity has plummeted this year, and the Supreme Court plans to hear challenges against the amnesty he has granted Bhutto to protect her from old corruption charges.

"Benazir should come back. She is a great leader of this country," said 22-year-old Maria Khan, a dancer in Karachi's red light district.

"If she comes back, it would reduce poverty and unemployment. I think she will form a strong government along with Musharraf."

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