TONY JONES: The American military has displayed pictures of 42 prisoners it rescued from a desert hide-out in Iraq, believed to be an Al Qaeda base. Some of the prisoners have reported they'd been kidnapped and held at the camp for up to four months. Tom Iggulden reports.

TOM IGGULDEN: This modest hide-out held 42 prisoners until American troops raided it today, after a tip-off from locals...

TOM IGGULDEN: Further south, in Baghdad, there was more violence in the Shiite stronghold of Sadr City, where American forces are still trying to quell local militia groups. Several raids over the weekend were supported by an air strike, angering local residents. But the US military is doing some grieving of its own after 12 American soldiers were killed over the weekend, putting May on track to be the deadliest month for the US effort in Iraq this year..

TOM IGGULDEN: But the Bush Administration is still looking for the right strategy to get the outcome it wants. Tonight, as Lateline goes to air, a historic meeting between the US and Iran is taking place, to try to find common ground on stabilising Iraq. It's the first public diplomacy between the two for 25 years. And some have their doubts about how effective it can be.

AFSHIN MOLAVI, NEW AMERICA FOUNDATION: Iran does not want to see a thriving, successful, prosperous, pro-American Iraq. There is almost an an unwritten policy in Tehran of promoting managed chaos within Iraq...

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