By Daniel Wallis and Barry Moody

ADDIS ABABA, Feb 2 (Reuters) - An African Union summit expressed alarm and pain on Saturday over a rebel attack on the Chadian government and continuing bloodshed in Kenya.

A three-day meeting of the pan-African body was dominated first by Kenya's month-long crisis, in which nearly 900 people have been killed, and then by the breaking news from Chad, where rebels fought their way into the capital N'Djamena.

The new AU chairman, Tanzanian President Jakaya Kikwete, told the summit closing session: "It is even more sad to see new wounds opening up with blood flowing in Kenya and now Chad."

Rebels who have advanced swiftly from the Sudanese border, were battling government troops around the presidential palace on Saturday in an attempt to overthrow President Idriss Deby.

Kikwete said that if the rebels took power, Chad would be thrown out of the 53-nation AU. "If the rebellion succeeds, certainly we will excommunicate them from the African Union," Kikwete told a closing news conference.

Libyan leader Muammar Gaddafi also condemned the Chadian rebels, saying their attack was "a great violation" against a legal and democratically elected government.

He expressed frustration that the African Union was powerless to intervene to end conflicts across the continent.

"What can we do for Kenya, for the Comoros, for Chad? This is painful for us, as under the eyes of the whole world we kill each other," he said.

The Libyan leader, dressed in an orange robe and cap, said the AU charter allowed the body to intervene to end conflict but there was no mechanism for doing this.

"We have to have a security council, a machinery that can respond very quickly... This is something we should have done and we were wrong not to do it," he said.

EGYPT SUMMIT

Gaddafi, who has long pressed for a United States of Africa, told reporters earlier a committee on this project would report to the next summit, in six months in Egypt.

The previous summit, in Ghana last year, resisted pressure from Gaddafi and others, including Senegal's President Abdoulaye Wade, to press ahead immediately with creating a federal state.

Earlier in the summit, a string of leaders condemned the violence in Kenya, which has reduced the former regional peacemaker and stable trade hub into one of Africa's most pressing crises. They called for urgent action to end it.

But the AU has been unable to take decisive action to help end the crisis. Outgoing AU chairman John Kufuor of Ghana's early attempt to mediate in Kenya failed and he handed over to former U.N. Secretary-General Kofi Annan.

President Mwai Kibaki and opposition leader Raila Odinga have entered negotiations led by Annan and the two sides on Friday reached a framework agreement to end the violence .

But Kibaki made two uncompromising speeches in Addis Ababa strongly attacking the opposition and sticking to positions already rejected by Odinga.

On Saturday Odinga said Kibaki's summit speech, particularly his insistence the election dispute could be settled by Kenya's courts, had undermined Annan's mediation. The opposition says the courts are biased and would take years to rule.

(Additional reporting by Barry Malone, Writing by Barry Moody; Editing by Matthew Tostevin)

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