(Updates with analyst comment)

By Caren Bohan

CAMP DAVID, Md., Aug 6 (Reuters) - U.S. President George W. Bush and Afghan President Hamid Karzai vowed on Monday to finish off the Taliban, which Karzai said was a defeated force that attacks civilians but is not a threat to his government.

Karzai, visiting the United States amid renewed concern about worsening violence in Afghanistan and the threat from militant hide-outs across the border in Pakistan, said he was building up his army and police with U.S. help.

"Our enemy is still there, defeated but still hiding in the mountains. And our duty is to complete the job, to get them out of their hide-outs in the mountains," he said in the second day of meetings with Bush at the Camp David presidential retreat in the Maryland mountains.

Bush, who has been on the defensive about the failure to find al Qaeda leader Osama bin Laden, said he was confident U.S. and Pakistani forces would track down the militant group's leaders.

But he stopped short of saying whether the United States would seek Pakistan's permission before going after those militants. The subject is a sensitive issue in Islamabad.

"I'm confident, with real, actionable intelligence, we will get the job done," Bush said.

Bin Laden is believed by U.S. intelligence officials to be hiding in the rugged tribal region of Pakistan, an area near the border of Afghanistan that has been a source of concern to Karzai because it is seen as a hotbed of Taliban activity.

The Taliban, driven from power by a U.S.-led invasion in 2001, are "a force that is acting in cowardice" by attacking schoolchildren, teachers, clergy, engineers and international aid workers, Karzai said.

"They're not posing any threat to the government of Afghanistan," Karzai said. "It's a force that is frustrated."

DIFFERENCES OVER IRAN

Bush said the two countries' shared Islamic militant foes were "part of an ongoing challenge that the free world faces."

But Bush and his guest differed on Afghanistan's neighbor Iran, a U.S. foe which Karzai said on Sunday was playing a helpful role in his country.

The Iranians are "not a force for good, as far as we can see," Bush said. "They are a destabilizing influence, wherever they are now."

On Afghanistan's newest crisis, Bush and Karzai agreed the Taliban should not get concessions for the release of the 21 Korean hostages they seized last month, a White House official said.

"Both leaders agreed that in negotiations for the release, there should be no quid pro quo for the hostages. The Taliban are brutal and should not be emboldened by this," White House spokesman Gordon Johndroe said.

The kidnappers have killed two of the 23 initially captured and are demanding the release of Taliban prisoners in exchange. South Korea has appealed to the United States and the Afghan officials to negotiate the release.

Karzai's weak central government faces numerous challenges, including suicide bomb attacks by the Taliban, mounting civilian casualties and a burgeoning opium trade.

"I think Bush and Karzai were trying to put the best face on things," said Teresita Schaffer, a former senior State Department official now with the Center for Strategic and International Studies.

"Overall, Afghanistan is still in a rather difficult state," Schaffer said, but she added that it was a positive sign that Karzai and Pakistani President Pervez Musharraf were both participating in a jirga or grand assembly in Kabul on Thursday aimed at building confidence between their countries.

The two countries have had frictions, but Schaffer said, "You can't solve the problems of Afghanistan without Pakistan."

(Additional reporting by Paul Eckert and Andy Sullivan)

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