(Adds Bush naming war czar in paragraphs 10-11)

By Paul Tait and Ibon Villelabeitia

BAGHDAD, May 15 (Reuters) - U.S. forces searching for three soldiers said on Tuesday suspected al Qaeda militants holding the men were trapped in an area of farmland near Baghdad.

Backed by helicopters and using sniffing dogs, thousands of American and Iraqi troops taking part in the massive hunt have isolated towns in the "Triangle of Death" south of the capital, where the captors are believed to be hiding, the military said.

Al Qaeda has warned the U.S. military that the hunt could put the captured soldiers' lives at risk.

"The captors don't have freedom of movement; if they have the soldiers, they can't move them from where they are," said Major Kenny Mintz, an officer participating in the operation. "We're doing a deliberate search of the areas for the people responsible for the soldiers we're looking for."

"Right now our focus is on searching for the missing soldiers, and we're trying to isolate the areas where we think they could be," Mintz was quoted as saying in the statement.

The soldiers, part of a larger unit sent to intercept roadside bombs in a Sunni Arab militant stronghold, went missing after a coordinated ambush on Saturday in which four other U.S. soldiers and an Iraqi army translator were killed.

The hunt in a terrain of orchards and canals centered near the town of Mahmudiya, where suspected al Qaeda militants abducted two U.S. soldiers in June. Their badly mutilated bodies were found days later.

The U.S. military said it had detained 11 people and conducted "tactical questionings" since the search began.

The al Qaeda-led Islamic state in Iraq, has mocked the U.S. forces searching their comrades by saying "you are only tiring yourself." The Sunni Islamist group has not given any proof the soldiers were still alive.

In Washington, U.S. President George W. Bush, ending a long search, chose Army Lt. Gen. Douglas Lute on Tuesday as White House "war czar" for Iraq and Afghanistan to coordinate policy among sometimes competing agencies and try to implement Bush's war strategy.

If confirmed by the U.S. Senate, Lute, 54, will take on the high-profile job against a backdrop of rising Democratic criticism of the unpopular war and the failure so far of a troop buildup to halt violence.

Bush is deploying 30,000 more U.S. troops in Iraq in a last-ditch effort to stop a slide into all-out civil war between majority Shi'ites and Sunni Arabs.

Bush, who has called al Qaeda "public enemy number one" in Iraq, is under growing pressure from Democrats to set a timetable for withdrawal from Iraq. More than 3,300 U.S. soldiers have been killed since the 2003 invasion to oust Saddam Hussein.

Some moderate Republicans have suggested they will desert Bush unless he shows political and military progress by September, when the American commander in Iraq is due to present an assessment report on a military build-up in Baghdad.

CONSTITUTIONAL REFORM

An important step towards meeting benchmarks that Washington has set Baghdad to end sectarian violence was taken on Tuesday, when a committee set up to reform Iraq's constitution said it would send its draft to parliament next week.

Sunni Arabs, who make up the backbone of the insurgency, say the constitution in its current form cedes too much power to majority Shi'ites and ethnic Kurds.

Other power-sharing legislation that Bush is pressing Iraq to pass includes laws to share Iraq's vast oil wealth and to end a ban on former members of Saddam's party holding public office.

In Washington, White House spokesman Gordon Johndroe welcomed the move, but said: "There is more work to be done, but this step will help in the process of bringing all Iraqis together to help build a stable, secure and unified democracy."

Resistance is expected in parliament, however, especially from Shi'ites virulently opposed to former Baath members returning to positions of influence, and from non-Arab Kurds who resist the wording on the Arab identity of Iraq.

Five U.S. embassy contract workers were hurt when at least one round of what an embassy spokesman described as "indirect fire" landed in the heavily fortified Green Zone on Tuesday.

Leading al Qaeda expert Rohan Gunaratna told a security conference in London that a U.S. troop pullout would leave Iraq a "terrorist Disneyland" where al Qaeda could build its strength. (Additional reporting by Mariam Karouny in Baghdad, Mark Trevelyan in London and Steve Holland in Washington)

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