By Khaled Yacoub Oweis

NAHR AL-BARED CAMP, Lebanon, May 22 (Reuters) - Palestinian refugees gathered round the bodies of two boys killed by Lebanese army shelling in the Nahr al-Bared refugee camp in northern Lebanon. Their mood was pure rage.

"The army bombed everywhere. It targeted everything. Even the Israelis would have been more merciful," said Rami Mahmoud, a resident of Damoun -- a district in the run-down camp where Lebanese troops had been fighting militants since Sunday.

Named after the area in Galilee once home to the refugees who fled when Israel was created in 1948, Damoun was largely destroyed during three days of shelling of the camp -- the base for militant Islamist group Fatah al-Islam.

"Bring in Ehud Olmert, please," said, Mahmoud suggesting the Israeli prime minister would have shown more mercy towards the Palestinians than the Lebanese army, which has repeatedly said it has not been targeting civilians.

Some 1,200 people, including about 900 civilians, were killed in Lebanon last July and August during a war between Lebanon's Hezbollah guerrillas and the Jewish state last year in which 158 Israelis also died.

Scores of residents of the camp, home to some 40,000, made a dash for their lives in beaten up cars along the Mediterranean seaside road, making the most of a truce to escape in case fighting resumed.

Several young fighters from Fatah al-Islam, a small Palestinian-led faction, emerged from the dark alleyways of the camp, clutching AK-47 rifles.

HUDDLED "LIKE SARDINES"

Several bodies lay in the streets, which were strewn with rubble. Mohiddin al-Labwani, a camp officer with the U.N. agency which cares for Palestinians, said 20 people were killed and 70 wounded in Damoun alone.

Palestinian sources have put the number of dead civilians in the camp at 27. Residents said bodies had yet to be pulled from under the rubble of buildings destroyed during the fighting.

Camp residents, who include poor Lebanese, said the army may have been justified in pursuing Fatah al-Islam, which they considered outsiders. But indiscriminate shelling of the camp stripped the army's campaign of legitimacy, they said.

"We have been huddled for three days like sardines, 60 in a room, without water, communications or electricity," said Mahmoud al-Hindi.

"I remember when a Lebanese army post nearby came under bombardment during last year's Israeli invasion," he said. "All of the camp rushed to help. This is how they treat us?"

A shell had blown a gaping hole in the house of 80-year-old Hajjeh Kamila, one of the camp's first residents.

"The whole family had assembled on the first floor. It's a miracle no one was hurt. Our lives have been one catastrophe after another," she said.

"How can they ask us to disarm after they did this to us?" asked Jamila Ahmad, another refugee. "The Palestinians will not throw away their arms before returning to our homeland."

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