It isn't just the death of Americans that distinguishes the battle of Shah-i-Kot—or even its intensity. (After a week of fighting, U.S. and French planes were still bombing enemy positions relentlessly.) Privately, in the Pentagon, a conviction is growing that the battle may be a climactic moment in the war. Before Christmas, in the ridges and caves of Tora Bora, the Americans had let their Afghan proxies do most of the fighting on the ground. As a result, hundreds—perhaps thousands—of al-Qaeda fighters escaped to fight another day. In Shah-i-Kot the brunt of the dirty work has been borne by Americans. After a week of fighting, a military source estimated that 800 Taliban and al-Qaeda fighters had been killed. Total confirmed casualties on the allied side: 11 dead, of whom eight were American and three Afghan, and 88 wounded, 18 of them Afghan.

The commitment of U.S. power was necessary because of the surprisingly large force arrayed in Shah-i-Kot. Hamid Karzai, the leader of Afghanistan's interim government, called the valley "the last isolated base of terrorism" in his country. Pentagon officials dispute that—a source says there are still major pockets of resistance around Herat and Kandahar—but acknowledge that the number of enemy troops in Shah-i-Kot was extraordinary.

One other thing about the Taliban and al-Qaeda warriors at Shah-i-Kot: they fought to the death. That may be because the Arabs, Chechens and Uzbeks among them have nowhere to go, save Guantanamo Bay. But their ferocity may have another cause. In the caves on the snow-covered ridges may hide some top al-Qaeda and Taliban leaders, including, possibly, one of the big three, Osama bin Laden, Mullah Omar and Ayman al-Zawahiri. "There's no question that these people didn't just happen to all meet there," says Defense Secretary Donald Rumsfeld. "There's clearly leadership involved."

Shortly after the battle began, U.S. intelligence detected hundreds of al-Qaeda sympathizers streaming toward the front lines from Pakistan. American officials wonder why such reinforcements would set off on a suicide mission unless they thought their leaders were trapped. American forces believe they have identified one "high-value target" in the valley, distinguished by the extent of his protection. Sardar Khan Zadran, a local commander, told Time that last Wednesday, at a checkpoint on a mountain road leading to Khost, American-trained Afghan militiamen frisked two tribesmen and found an audiotape of bin Laden, some photographs of him, a letter detailing al-Qaeda operations in Afghanistan and a list of local chieftains who are taking bribes. The tape was whisked off to Bagram for analysis. Does Khan think bin Laden is up in the hills? "I don't know about Osama," he told Time, "but a lot of his friends are there."

More friends, certainly, than U.S. intelligence had detected. "The picture intel painted," says Sergeant Major Frank Grippe of the 10th Mountain Division, who took shrapnel wounds in his legs on the first day, "was just a little bit different from events happening on the ground." That's a soldier's understatement. As they prepared at Bagram, U.S. forces were told to ready themselves to meet from 150 to 200 of the enemy. After less than a week of battle, the Pentagon was already claiming they had killed around 500, and the fighting still wasn't over. What had gone wrong?

The answer: partial information and the rivalries of local warlords, which in Afghanistan are two sides of the same coin. The Americans have always known that Paktia province, where the fighting is taking place, is bandit country. (Ironically, the new governor of the province, and Karzai's voice there, is an American citizen: Taj Muhammad Wardak spent the past decade in Los Angeles.) Shah-i-Kot was a well-known base for the mujahedin fighting Soviet forces in the 1980s; indeed, the Soviets never took the valley. The soft shale on the ridges is ideal for the construction of caves. One cave, visited last week by a Time reporter, was at least 40 yards deep and high enough to swallow a pickup truck. Many Afghans in Paktia still sympathize with the Taliban and al-Qaeda. Near Khost, the tomb of an al-Qaeda warrior killed by a U.S. bomb while he was praying at a mosque has become a shrine. Local villagers are convinced that the dead man's ghost has healing powers.

After the fall of the Taliban, about 500 renegade fighters, together with Arabs and other foreigners and their families—around 2,000 people, according to some estimates—holed up in the town of Zurmat. About three weeks ago, local chieftains got wind of a possible U.S. strike and went to the al-Qaeda fighters with an open Koran, pleading with them to leave—and offering them about $10,000 to do so. Then the al-Qaeda men appeared in the village with their wives and children, all wearing funeral shrouds, according to Din Mohammad Darwish, a local radio technician. They cried, "You're sending us to our graves!" The villagers backed down.

Infighting among local warlords in the region allowed al-Qaeda to mass there. "We were busy with clashes of power," says Afghan commander Abdul Mateen Hassan Khel, sitting in an office in the provincial capital of Gardez, with 40 Russian tanks rusting outside his window. "Pockets of al-Qaeda from Jalalabad and other places were able to move in with them, so many are there now." Whether or not bin Laden and his top lieutenants are in the region, the known commanders are ripe enough targets. They include Ibrahim Haqqani, whose brother, a Taliban leader sought by the U.S., is thought to be hiding in Pakistan; Latif Mansour, the former Taliban Minister for Agriculture; and Saifur Rahman Mansoor, Latif's nephew, a former Taliban military commander in his early 30s.

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