* Islamist raiders and civilians killed in Gao gunbattle
* French, Malians reinforce security in tense Saharan town
* Guerrilla tactics raises "mission creep" dilemma for French (Adds Hollande comments)
By David Lewis
GAO, Mali, Feb 11 (Reuters) - Malian troops hunted house-to-house in Gao on Monday for Islamist insurgents whose attack inside the northern town at the weekend showed the risk that French forces might become entangled in a messy guerrilla war.
Sneaking across the Niger River under cover of darkness, the al Qaeda-allied rebels fought Malian and French troops on Sunday in the streets of the ancient Saharan trading town, retaken from the Islamists two weeks ago.
Malian Defence Minister Yamoussa Camara said three of the Islamist raiders were killed and 11 taken prisoner, while some Malian soldiers were wounded in the street fighting.
The brazenness of the rebel raid, which followed successive blasts by two suicide bombers at a northern checkpoint, was a surprise to the French-led military operation in Mali which had so far faced little real resistance from the Islamists.
"They took advantage of the two suicide attacks on Saturday and Sunday to infiltrate the town," Camara told a news conference in Bamako. "With young people desperate over their future, it is possible to take them and indoctrine them to the point of sacrificing their own lives."
A doctor in Gao's hospital, Noulaye Djiteyi, said three civilians were killed and 11 wounded. The casualties were hit by stray bullets in the gunbattle.
The attack indicated that the French forces, which number 4,000 soldiers on the ground, were vulnerable to hit-and-run attacks by the jihadists to the rear of their forward lines.
French and Malian officials in Gao said the risks of infiltration, shootings and bomb blasts remained high.
"The Malians are checking house-by-house, block-by-block," a French officer, who asked not to be named, told reporters.
French and Malian soldiers in armoured vehicles reinforced locations and sandbagged road checkpoints at the entrances to the town, alert for further attacks from bands of Islamist insurgents reported hiding in the surrounding desert scrub.
France intervened in Mali last month as Islamist forces, who had seized control of the north in the confusion following a military coup in March 2012, advanced on the capital Bamako.
That had pushed Mali to the forefront of U.S. and European security concerns, with fears the Islamists would turn the country into a base for international attacks.
French leaders have said they intend to start pulling troops out of Mali in March, and want to hand over security operations to a larger, 8,000-strong African military force currently still being assembled and drawn mostly from West African states.
But this African contingent is still struggling to deploy in positions behind the French, raising the risk that Paris' forces could face "mission creep" and be obliged to stay on longer to guarantee security in the face of rebel guerrilla tactics.
"There is no doubt that the Islamists will find weak spots," Jakkie Cilliers, executive director of the Pretoria-based Institute for Security Studies, told Reuters.
"Now it becomes all complex and messy," he added.
MALI "NOT TOTALLY SECURED"
President Francois Hollande acknowledged that France's military still had more work to do before it achieved its aim of ousting the al Qaeda-linked groups from all of northern Mali.
"We have not finished our task," Hollande said in Paris, after meeting with Nigerian President Goodluck Jonathan. "There is a risk of either attacks or guerilla tactics so we need to continue to securitise all of Mali's territory."
Gao's main market was bustling on Monday but crowds gathered to look at the wrecked police station building where the jihadist raiders, some on motorbikes, firing AK-47s and rocket-propelled grenades, fought French and Malian troops.
Witnesses said bodies still lay in the dusty streets, some apparently rebels, others civilians caught by stray bullets.
"I passed by the police station and I saw shredded corpses inside. There are three victims from stray bullets," local resident Ibrahim Toure told Reuters.
After driving the bulk of the insurgents from northern towns such as Timbuktu and Gao, France has been focusing its operations on Mali's remote northeast mountains, where French special forces and Chadian troops are hunting rebel bases.
They believe the rebels are holding at least seven French hostages, previously seized in the Sahel, in hideouts in the Adrar des Ifoghas range that straddles the Mali-Algeria border. (Additional reporting by Adama Diarra and Tiemoko Diallo in Bamako, John Irish in Paris; Writing by Pascal Fletcher; Editing by Angus MacSwan)