"Guns can be used today but you cannot use them to rule tomorrow. We reject war," Saleh declared.

Ten soldiers were killed in three attacks by tribesmen and al Qaeda militants in several provinces, officials said.

In the southern city of Taiz, riot police fired in the air to keep vast, unruly crowds of pro and anti-Saleh demonstrators apart, but there were no serious injuries, witnesses said.

A sea of anti-Saleh protesters, perhaps in the hundreds of thousands, inundated the streets of Taiz, Yemen's third city and an epicentre of opposition to the 69-year-old president.

But in Yemen's northwestern city of Hajja, a 12-year-old boy was shot dead when security forces opened fire to prevent a crowd of anti-government protesters entering the city, witnesses told Reuters by telephone.

Tens of thousands of Saleh loyalists turned out in Sanaa, the capital, for what they called a "Friday of Reconciliation", waving Yemeni flags and pictures of the president.

Their numbers were matched by protesters demanding Saleh's immediate departure, spilling out of their usual protest area around Sanaa University to mark a "Last Chance Friday" in nearby Siteen street, where there was a heavy security presence.

That raised concern that Saleh's security forces and republican guards might clash with troops loyal to renegade general Ali Mohsen, protecting the protesters in Sanaa.

Demonstrators voiced scepticism about the latest Gulf plan aimed at halting Yemen's descent into more violence and chaos.

The proposal of the six-nation Gulf Cooperation Council (GCC) calls for Saleh to hand power to his vice president one month after signing an agreement. He would appoint an opposition leader to lead an interim cabinet tasked with preparing for presidential elections two months later, a Yemeni official said.

IMMUNITY FROM PROSECUTION

The plan, presented on Thursday, also gives immunity from prosecution to Saleh, his family and aides -- anathema to his foes, who would also have to end protests under the proposal.

"We won't depend on any initiative that doesn't demand that this man leaves right away," said protester Manea Abdullah. "We are sticking to the demands of the revolution for an immediate departure and prosecution of those who killed our comrades."

Saleh's long-time Gulf and Western allies, concerned that chaos in Yemen will open more opportunities for ambitious al Qaeda militants, are trying to broker an orderly transition after three months of protests against Saleh's 32-year rule.

Protests in the southern port of Aden started up later in the evening on Friday, as thousands of demonstrators calling for Saleh's departure sought to avoid temperatures of over 40 degrees celsius (104 degrees Fahrenheit).

While organised opposition parties may still be ready to do a deal, many protesters do not trust Saleh to implement it.

"This guy is a liar, we won't believe anything even if the opposition accepts the Gulf initiative," said Abdulnasser Ahmed.

"Every time he agrees to something, then backs off. We know his ways and so does the rest of the world. That's why the world should support our demands that he go."

In the lawless eastern province of Maarib, a local official said anti-Saleh tribesmen had ambushed troops trying to secure a key route for gas shipments, killing two soldiers, wounding 18 and destroying a tank and an armoured vehicle.

Tribesmen disrupting the main road from Sanaa to Maarib, where most of Yemen's gas is produced, have made it impossible for trucks to distribute cooking gas to the rest of the country.

Shortages have quadrupled cooking gas prices on the black market to 5,000 rials ($20) from 1,200. Infuriated residents have blocked roads in some Sanaa districts with empty gas bottles. The crisis has prompted others to join anti-Saleh protests, where they have scrawled "Leave" on gas canisters.

Prolonged turmoil has driven the rial to near-record lows of around 250 to the dollar from 214 nine weeks ago. It has become harder to find outlets ready to sell dollars, residents say.

Violence involving suspected al Qaeda militants also flared on Friday, with seven soldiers killed when their convoy came under fire in Maarib, a government official said.

One soldier was killed and another wounded when the army clashed with gunmen thought to belong to al Qaeda's Yemen-based wing tried to seize a post office in Zinjibar, in the southeastern province of Abyan. The armed men later sped away on motorcycles.

The toll in a Thursday night clash in the southern province of Lahej rose to five soldiers killed and three wounded, according to a local official. Two militants were also killed.

*Additional reporting by Mohammed Mukhashaf in Aden and Erika Solomon in Dubai; writing by Alistair Lyon; editing by Philippa Fletcher