* Crowds topple statue of Assad's father
* Syria war threatens stability in neighbouring states
* Rebels push into "hotel city", home to many displaced (Adds new material on the city of Raqqa)
By Khaled Yacoub Oweis
AMMAN, March 4 (Reuters) - Syrian opposition fighters captured the northeastern city of Raqqa on Monday and crowds toppled a statue of President Bashar al-Assad's father, opposition sources and a resident said.
The fall of Raqqa on the Euphrates River would be a significant development in the two-year-old revolt against Assad. The rebels do not claim to hold any other provincial capitals.
Rebel fighters said loyalist forces were still dug in at the provincial airport 60 km (40 miles) from Raqqa and they remained a threat. A resident said that a Syrian military intelligence compound in the town was not in rebel hands but was surrounded by anti-Assad fighters.
On Monday the civil war spilled into neighbouring Iraq, where officials reported that gunmen had killed at least 40 Syrian soldiers and government employees as they headed home after fleeing a Syrian rebel advance last week.
Around 65 Syrian soldiers and officials had handed themselves over to Iraqi authorities on Friday after rebels seized the Syrian side of the border crossing at the Syrian frontier town of Yaarabiya.
Iraqi authorities were taking them to another border crossing further south in Iraq's Sunni Muslim stronghold, Anbar province, when gunmen ambushed their convoy, a senior Iraqi official told Reuters. No group has claimed responsibility.
"The incident took place in Akashat when the convoy carrying the Syrian soldiers and employees was on its way to the al-Waleed border crossing," a senior Iraqi official told Reuters.
"Gunmen set up an ambush and killed 40 of them, plus some Iraqi soldiers who were protecting the convoy."
A member of Anbar's provincial council, Hikmat Suleiman Ayade, put the number of people killed at 61, including 14 Iraqis who were protecting the convoy. Around a dozen others were being treated in hospital for their wounds, he said.
The ambush inside Iraq illustrates how Syria's conflict, with its sectarian overtones, has the potential to spill over its borders and drag in neighbouring countries, further destabilising an already volatile region.
Iraq's Anbar province is experiencing renewed demonstrations by Sunnis against the government of Shi'ite Prime Minister Nuri al-Maliki over what they see as the marginalisation of their minority and misuse of terrorism laws against them.
Syria's rebels are mostly Sunnis fighting to topple President Bashar al-Assad's government, dominated by Alawites, an offshoot of Shi'ite Islam.
Some 70,000 people have been killed in Syria and nearly a million have fled the country, the United Nations says.
In what could be a new danger for the millions of Syrians who have fled their homes but remain inside the country, rebels pushed into Raqqa, a city known as the "hotel" of the country after thousands of displaced families fled there.
Residents of the northeastern city, home to half a million people, had pleaded with rebels not to enter the densely built metropolitan area, fearing that Assad's war planes and artillery could target residential areas.
The Syrian Observatory for Human Rights, a Britain-based monitoring group, said the Islamist Jabhat al-Nusra and other rebel groups launched the offensive on Saturday and large parts of Raqqa were now under rebel control.
Opposition activist photographs showed a burning guard post, men ripping down a poster of Assad and a fallen statue of his late father, Hafez al-Assad, who took power in 1970.
Video footage posted on the Internet by rebel groups showed an abandoned prison in what they said was the centre of the city, 100 miles (160 km) east of Aleppo.
The Syrian National Council, a large bloc within the umbrella Syrian National Coalition, said the capture of Raqqa would prove "a decisive victory in the struggle for the downfall of the criminal Assad regime and to salvage Syria from the ugliest epoch in its history".
In a statement, the council said that with the fall of Raqqa a link was established between vast areas that fell to the opposition in the oil-producing east of the country and rebel-held regions in the northern Aleppo and Idlib provinces.
Events in Raqqa were not confirmed by independent media, which are restricted in their access to combat zones.
International powers are divided over Syria, with Russia and Shi'ite Iran supporting their historical ally Assad and the United States and Sunni Gulf countries backing the opposition.
Saudi Arabia and Qatar are widely believed to be providing weapons to the rebels, but the United States says it does not wish to send arms for fear they may find their way to Islamist hardliners who might then use them against Western targets.
U.S. Secretary of State John Kerry, who said last week that Washington would directly provide medical supplies and food to rebels, reiterated that concern on Monday.
"There is no guarantee that one weapon or another might not at some point in time fall into the wrong hands," he told a joint news conference with Saudi Foreign Minister Prince Saud al-Faisal in Riyadh.
"Believe me the bad actors regrettably have no shortage of their ability to get weapons, from Iran, from Hizbollah, from Russia unfortunately, and that is happening," Kerry said.
Faisal, without confirming the supply of arms to rebels, said Saudi Arabia would do "everything within its capabilities" to provide "aid and security for the Syrians". (Additional reporting by Oliver Holmes in Beirut, Kamal Naama in Anbar and Angus McDowall in Riyadh; Editing by Robin Pomeroy and Stephen Powell)