(Recasts with more military deaths)

NAHR AL-BARED, Lebanon, Aug 1 (Reuters) - Al Qaeda-inspired militants killed three Lebanese troops at a Palestinian refugee camp on Wednesday as the Lebanese army celebrated its 62nd anniversary embroiled in a bloody battle against the Islamists there.

The Lebanese had hoped their Army Day would be marked by the military's victory in its 10-week-old battle with Fatah al-Islam at Nahr al-Bared camp in north Lebanon that has so far killed at least 253 people.

But security sources said the army's advance into the camp has been held up by fierce resistance from the fighters who had laid down sophisticated mines and booby traps around their last positions at the devastated camp, once home to 40,000 refugees.

One soldier was shot dead by a sniper and two more died in fresh fighting, taking the military's death toll to 127 since the fighting, Lebanon's worst internal conflict since the 1975-1990 civil war, erupted on May 20.

More than 85 Fatah al-Islam fighters and at least 41 civilians have also been killed, while 65 militants have been detained and charged with terrorism -- a charge carrying the death penalty.

Political and security sources said last week that the Lebanese army was in the final phase of its campaign to defeat Fatah al-Islam and exert its control over the camp.

Fatah al-Islam, which split from a Syrian-backed Palestinian faction last year, has Lebanese, Palestinians and other Arabs in its ranks, including some who have fought in Iraq. It says it supports al Qaeda's ideas, but has no direct links with it.

The conflict has further undermined stability in Lebanon, already crippled by a prolonged political crisis and shaken by bombings that have killed six U.N. peacekeepers and two anti-Syrian lawmakers in the past nine months.

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