* Opposition negotiations in Istanbul end without agreement
* Leaders say will make proposal within 10 days
* World powers fear rise of Islamists in Syria's opposition
* First Patriot missiles arrive on Turkey-Syria border
By Khaled Yacoub Oweis and Oliver Holmes
ISTANBUL/BEIRUT, Jan 21 (Reuters) - Syrian opposition leaders said on Monday they had failed to put together a transitional government to run rebel-held areas of the country, a blow to the exiled group trying to present an alternative to President Bashar al-Assad's rule.
Political efforts to resolve the conflict have largely faltered because of the rebels' failure to form a unified front and because world powers are backing opposing sides.
Talks held by representatives of the opposition Syrian National Coalition (SNC), a 70-member umbrella group dominated by Islamists and their allies, in Istanbul at the weekend only highlighted divisions in the coalition.
"This is a big blow for the revolution against Bashar al-Assad," said one opposition leader who attended the meeting but did not want to be named because he operates in secret in Syria.
Sources at the negotiations in Turkey said SNC President Moaz Alkhatib had flown to Qatar while the meeting was still in progress to ask for financial aid for a transitional government.
The SNC said in a statement a five-member committee would offer proposals for forming a government within 10 days.
However, the only name put forward at the meeting as a possible transitional prime minister was Riad Hijab, a former Syrian premier.
Veteran opposition campaigner Kamal Labwani, said Hijab - the highest ranking member of Assad's inner circle to defect since the revolt erupted in March 2011 - would be an efficient cabinet chief despite his past in the Assad administration.
"Hijab should be given a chance. After two years of trying it is someone else's turn," Labwani said.
More than 60,000 people have been killed in Syria's increasingly bloody 22-month civil war, at least 600,000 have become refugees and 2.5 million are suffering from hunger.
ISLAMISTS RISE, PATRIOTS ARRIVE
Neither side in the conflict has been able to gain clear military momentum. Rebels have been able to take territory but remain outmatched by the military's air power and organisation.
On Monday, the first of six NATO Patriot missile batteries intended to protect Turkey from a potential Syrian attack arrived from Germany after Ankara asked for NATO's help to bolster security along its 900-km (560-mile) border.
Damascus has called the move "provocative", in part because Turkey's missile request could be seen as a first step toward implementing a no-fly zone over Syrian airspace.
Iran and Russia, which have supported Syria throughout the uprising, have criticised NATO's decision, saying the Patriot deployment would intensify a conflict that most foreign governments have been reluctant to get sucked into.
World powers have become more wary of supporting the insurgents, especially as Islamist fighters, including some with links to al Qaeda, have taken the initiative in the battle against Assad's forces in many areas.
On Sunday, fighters from the prominent Islamist al-Nusra Front clashed with pro-government forces near the Wadi al-Deif military base, a strategic area the rebels have been trying to seize for months, the British-based monitoring group Syrian Observatory for Human Rights said.
The increasingly sectarian nature of the conflict has also unnerved potential backers who fear a backlash by Syria's Sunni Muslim majority against Assad's minority Alawite sect - an offshoot of Shi'ite Islam.
FIGHTING, BLACKOUT IN DAMASCUS
An air strike on the Harran al-Awamid area east of Damascus killed at least nine people on Sunday, the Observatory said.
Rising prices for basic commodities and fuel shortages have made life harder for residents of the capital and some said they spent Sunday night without power as fighting neared the centre.
Insurgents control a crescent of suburbs to the east and south of the city and have been advancing slowly toward its heart. Fighting broke out on Sunday just half a mile from the Old City in the capital's centre, residents said.
"Inside Damascus' Old City, you can't escape the muffled sounds of shelling and fighter jets and even machineguns fired off nearby," said a resident who visited the area.
It was unclear what caused Sunday's power outage, although state news agency SANA quoted the electricity minister as saying "terrorists", a term Damascus uses for rebels, had attacked a main electricity line. Power returned to some areas on Monday.
The rebels' failure to provide basic services and mounting reports of indiscipline and looting by insurgents have cost them public support in some areas.
The government sent reinforcements to the rebel-held Damascus suburb of Daraya on Monday, the Observatory said. Infantry and personnel carriers arrived on its outskirts which have seen months of artillery and air strikes, it said.
In the northern al-Raqqa province on Sunday night, ten people, including three children and two women, were killed in an air strike on al-Tabaqa, the group said. (Writing by Alexander Dziadosz; Editing by Louise Ireland)