(Adds Security Council consultations in paragraph 11)

By Patrick Worsnip

UNITED NATIONS, Oct 9 (Reuters) - The U.S. ambassador to the United Nations said on Tuesday it was time to prepare for a government transition in Myanmar but conceded that the ruling military would continue to play a role in the country's future.

Zalmay Khalilzad was speaking shortly before Western powers circulated to the Security Council's 15 members a substantially rewritten version of a proposed statement on the crushing of protests in Myanmar that they first drafted on Friday.

Though considerably watered down from the original, the statement calling for democratization in Myanmar would still mark the first time all the world's major countries, including China, have focused public pressure on the ruling junta.

"We believe it's very important ... that there be negotiations for a transition and that we need to start preparing ourselves with regard to a transition in Burma," Khalilzad told reporters, using Myanmar's former name.

"The military, as a national institution, has its role to play in the transition and post-transition but it's very important that a serious dialogue on transition begins and that the international community, regional players, play their roles."

Following pro-democracy demonstrations that were harshly suppressed by authorities, the junta has named an official to act as go-between in possible talks with detained opposition leader Aung San Suu Kyi.

Khalilzad called for conditions of her detention to be improved so she can prepare for negotiations and urged that U.N. special envoy Ibrahim Gambari, who ended a four-day visit to Myanmar last week, return as soon as possible to assist a dialogue.

The latest version of the proposed Security Council statement was circulated by the United States, Britain and France.

WATERED DOWN

The statement, recast after discussions with the other 12 council members, "strongly deplored" instead of "condemning" the repression of the demonstrators and took out a paragraph demanding a full account of those jailed, missing or killed.

It still called for the release of political detainees, including Suu Kyi, and a dialogue between the junta and the opposition, but it played up the role of Gambari and the United Nations, in an apparent concession to China. It inserted a phrase about the international community "helping" Myanmar.

Western diplomats said experts from the 15 council members would look at the new version on Wednesday. Previously unscheduled council consultations on Myanmar were set for Wednesday afternoon, the United Nations said.

Unlike a resolution, a statement is not legally binding. But if even the watered down text were approved by China, until now Myanmar's closest ally on the council, it would still send a forceful message to the junta.

China, which has used its veto to block previous Security Council action on Myanmar said any U.N. move now should be "prudent and responsible" and not involve sanctions. But it did not rule out the issuing of a statement.

"We all want it to be as constructive as possible -- to send a message without making it impossible for professor Gambari to undertake future missions," said Albert Yankey, a diplomat from Ghana, which chairs the Security Council.

U.N. Secretary-General Ban Ki-moon discussed Myanmar with U.S. first lady Laura Bush, who has taken an active role in bringing attention to human rights abuses there, Khalilzad and U.N. officials said.

Ban updated her on the outcome of Gambari's visit to Myanmar, said U.N. spokeswoman Michele Montas.

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