(Adds details on Baghdad clash)

By Dean Yates

BAGHDAD, April 10 (Reuters) - U.S. and Iraqi forces backed by attack helicopters fought gunmen in Baghdad on Tuesday, witnesses said, in what appeared to be the heaviest battle in the capital since a security crackdown was launched in February.

Northeast of Baghdad, a woman suicide bomber strapped with explosives under an Islamic gown killed 17 recruits outside a police station in the town of Muqdadiya, police officials said.

Two witnesses in Baghdad said they saw U.S. helicopters fire on buildings where gunmen had holed up in the Sunni stronghold of Fadhil. Police and witnesses said there had been casualties.

The U.S. military said there was an operation in the area and that an Apache attack helicopter had been hit by small arms fire. It returned to base.

The Baghdad offensive is regarded as a last-ditch attempt to halt Iraq's slide into all-out civil war.

Abu Omar, a local journalist and resident in Fadhil, said the operation by U.S. and Iraqi troops started before dawn. He said he saw helicopters rocket several buildings while gunmen armed with belt-fed machine guns roamed the streets.

Another resident also said he saw U.S. helicopters firing at buildings. One flew off trailing smoke, he said.

Both said fighting now appeared to have shifted out of Fadhil into neighbouring Sheikh Omar, an industrial area, and Bab al-Muadham district. Many shops in the area had closed.

Police said 33 people were wounded in the bomb attack in Muqdadiya, 90 km (50 miles) from Baghdad. It was the first major attack on volunteers for local security forces this year.

"I was heading to work when I saw this ball of flame between a crowd of people. I saw many people on the ground. Many had lost their limbs," said one witness who declined to be named.

Al Qaeda has been blamed for most attacks on police and army recruitment centres during the Iraq conflict. The last major attack was in December when 10 people were killed at a police recruitment centre in Baghdad.

GROWING TOLL

Four U.S. soldiers were killed on Monday, putting April on course to be the deadliest for troops this year as more American and Iraqi forces deploy under the Baghdad security plan.

The latest deaths bring to about 45 the number of U.S. troops killed in Iraq this month, half of them in the Baghdad area. Between 80 and 85 soldiers were killed in each of the first three months of the year, according to military figures.

U.S. President George W. Bush is sending 30,000 additional American soldiers to Iraq.

A key element of Operation Imposing Law is getting more U.S. troops on the streets and assigned to dozens of joint security stations with Iraqi forces across the capital.

Three of the U.S. soldiers were killed and another was wounded when a roadside bomb exploded near their patrol in Baghdad on Monday. Another was killed in volatile western Anbar province, heart of the Sunni Arab insurgency.

The U.S. military acknowledges the Baghdad security plan has increased the likelihood of more troop deaths.

"With more troops on the streets, there is more chance of casualties," said Lieutenant-Colonel Josslyn Aberle, a spokeswoman for U.S. forces in Iraq. (Additional reporting by Ahmed Rasheed, Yara Bayoumy, Aseel Kami, Mariam Karouny and Ross Colvin in Baghdad)

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