Kenya's feuding parties have moderated their positions at talks on President Mwai Kibaki's disputed re-election and hope to reach a deal within days to end a crisis that has killed more than 1,000 people.

Opposition leader Raila Odinga had accused Kibaki of rigging the December 27 poll, triggering riots and ethnic attacks that displaced around 300,000 more and smashed the country's image as a peaceful business, tourism and transport hub.

Former U.N. boss Kofi Annan is leading talks to end the turmoil, and looked on Friday to have made significant progress.

"Apparently, there was a newfound spirit of camaraderie among the negotiators ... giving hope to Kenyans and the world that the resolution was in sight," Kenya's main Daily Nation newspaper said in an editorial on Saturday.

"This goodwill should be exploited to the maximum."

Quoting sources in the discussions, local media said both parties had made concessions, paving the way for power sharing.

When talks resume on Monday, delegates will debate how that might work over a two to three year period, the Nation said. It said a truth, justice and reconciliation commission would also be set up to heal the wounds caused by the violence.

Proposals for a recount or swift re-run of the election have been set aside because of persistent security fears and the number of voters uprooted from their homes, the reports said.

Annan's mediators were due to address a special session of parliament on Tuesday to brief legislators on the developments.

Odinga's Orange Democratic Movement (ODM) is no longer calling on Kibaki to step down, local media said, while Kibaki's Party of National Unity (PNU) has dropped its demand that the opposition take any grievances over the polls to court.

TOUGH TALKS AHEAD

Despite the apparent signs of progress, a lasting deal was still far from certain. Kenya's bloodshed has exposed deep divisions over land, wealth and power sown during British colonial rule and stoked by politicians ever since.

In a sign of the tough talks still to come, the opposition-leaning Standard newspaper said Odinga's side was insisting any interim government be composed according to the strength of the parties in parliament. The ODM won 99 seats to the PNU's 43 in parliamentary elections also held on December 27.

Annan, giving an optimistic assessment on Friday, said he hoped delegates would conclude their discussions on the settlement of the political issues by early next week.

But he urged journalists not to listen to rumours. "Please don't pay much attention to the speculation," he said.

The weeks of unrest have horrified Kenyans, neighbouring states and world powers alike -- leading to a bigger and faster international response than has been seen elsewhere in Africa.

The latest dignitary to arrive, U.N. aid boss John Holmes, met displaced people in the Rift Valley towns of Nakuru and Molo on Saturday, the sites of some of the worst violence.

"It's very tragic to be in Kenya and to see scenes where people have had to flee their homes to go to camps ... We need to make sure that no one community is being favoured over the other and everyone is getting aid," he said.

Clement Omondi, a 25-year-old attacked by a mob who broke both his arms, told Holmes he wanted to return to his ancestral home in western Kenya, but had no way to get there.

"I have lost my livelihood. I have lost my house. I have no future," Omondi said. "Nakuru is no longer my home."

Odinga was also due in a Rift Valley town, Kericho, for the funeral of an ODM member of parliament who was shot dead by a traffic policeman last week. The opposition leader has called the killing a political act, without providing evidence.