(Updates with U.S. officials' testimony)

By Randall Mikkelsen

WASHINGTON, Sept 10 (Reuters) - Six years after the Sept. 11 attacks, Osama bin Laden's al Qaeda network is bleeding the U.S. military in Iraq while regrouping with an avowed aim of another strike on the United States.

U.S. intelligence agencies and other analysts say security improvements and international efforts against al Qaeda have helped prevent another major U.S. attack.

But the network's ability to attack the West is rebounding, they say, and already it has met what some analysts describe as a goal of luring the United States into a damaging Middle East war that would cripple U.S. influence in the region.

Al Qaeda has inspired cells and sympathizers who may be unable to strike on the scale of Sept. 11 but can nevertheless cause death and destruction.

"They have regained a significant level of their capability," National Intelligence Director Michael McConnell said of al Qaeda during a Senate hearing on Monday, the eve of the sixth anniversary. "The threat is real," he said.

Bin Laden last week issued a video saying the United States was vulnerable and Americans must embrace Islam to avert war.

Security analysts said the message could be a call for new attacks. White House homeland security adviser Fran Townsend rejected that view and called bin Laden "virtually impotent."

Bin Laden escaped a U.S.-led invasion of Afghanistan after the Sept. 11 attacks, and U.S. intelligence agencies believe al Qaeda has rebuilt around the Afghanistan-Pakistan border.

It has a new safe haven and "middle management" that can organize and train, McConnell and other officials told Congress. Its ranks are thinner and territory smaller than before Sept. 11, but it has stepped up recruiting, especially in Europe, they said.

U.S. President George W. Bush, who said after the Sept. 11 attacks he wanted bin Laden dead or alive, shifted his focus to Iraq and cast it as a central front against terrorism.

TAKING THE BAIT

That shift may have played into bin Laden's hands.

"Part of what bin Laden's strategy is, is to bait us into situations where we bleed ... We took the bait," said security analyst P.J. Crowley of the Center for American Progress.

The Iraq war made it easier for al Qaeda to kill Americans, through its al Qaeda in Iraq affiliate, said Mike German, a former FBI counterterrorism agent who is now a policy counsel at the American Civil Liberties Union.

The war also created a rallying cry at a time bin Laden was crippled by the loss of his Afghan sanctuary.

"No conflict drains more time, attention, blood, treasure and support for our worldwide counterterrorism efforts than the war in Iraq. It has become a powerful recruiting and training tool for al Qaeda," Thomas Kean and Lee Hamilton, co-chairmen of the U.S. government's Sept. 11 investigation commission, wrote in the Washington Post on Sunday.

The United States has made some, albeit slow, progress in detecting and preventing domestic attacks, Kean and Hamilton wrote. Airline security has been tightened, and authorities are keeping a closer watch on potential attackers.

Among U.S. plots which authorities say they have disrupted were plans this year to attack Fort Dix military base in New Jersey and John F. Kennedy airport in New York.

Internationally, attack plots in Germany and Denmark with suspected ties to al Qaeda were broken up just last week. A U.S. wiretapping program now being debated in Congress helped unveil the plots, McConnell and another official said Monday.

The United States has drawn international criticism and fueled domestic debate over what critics call an assault on civil liberties.

Congressional Democrats say the Bush administration has overreached in its electronic and satellite surveillance.

Internationally, "U.S. foreign policy has not stemmed the rising tide of extremism in the Muslim world," Kean and Hamilton wrote. "Instead we have lost ground."

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