(Adds defence minister's quote, paragraphs 3-4) By Yara Bayoumy NAHR AL-BARED, Lebanon, May 23 (Reuters) - Thousands of Palestinians fled a badly damaged refugee camp on Wednesday, reporting bodies in the streets after a fragile truce halted fighting between the Lebanese army and al Qaeda-inspired militants. Vehicles choked the main road out of the Nahr al-Bared camp, where the Lebanese army had been battling the Fatah al-Islam militant group since Sunday in Lebanon's worst internal fighting since the 1975-1990 civil war. Lebanon's defence minister warned the militants to surrender or face further military action. "There are two options to solve this matter. The option we prefer is that they surrender to the Lebanese army and through it to the military court. The other option, which we do not want but are ready for should it be imposed, is the military option," Elias al-Murr told al-Arabiya television. Camp resident Awad Saeed Awad said as he boarded a bus for the nearby Beddawi camp: "It's mass destruction in there. The dead people are strewn on the streets." The fighting has killed at least 22 militants and 32 soldiers. Camp residents have spoken of dozens of civilians dead, with bodies in the streets and buried under rubble. An official source at Lebanon's defence ministry put the militant death toll at between 50 and 60, including fighters who died in clashes in the northern port city of Tripoli on Sunday. A third of the camp's 40,000 residents had fled, the Red Cross said. At Beddawi camp, hundreds packed the corridors and classrooms of one school, sleeping on mattresses on the floor. Seven schools run by the United Nations in Beddawi were full of evacuees, said Hoda Elturk, spokeswoman for UNRWA -- the U.N. agency which cares for Palestinian refugees. Sitting on a mattress on the floor of one of the schools, Umm Ali said there had been no water in Nahr al-Bared. "We were stepping on the dead bodies in the street when we escaped," she said. The fighting eased on Tuesday after an informal truce. A military source said there was calm but "the matter is not over. It will only end with the final end of this gang." Some residents had not left the camp, where aid workers were doing their best to help. "The ceasefire holds, but there is sporadic shooting," UNRWA's Elturk said. "It's very dangerous and risky to move inside the camp." Eleven trucks loaded with food for the evacuees were due to arrive from Jordan on Thursday, an ICRC spokeswoman said. "AUTONOMOUS ENCLAVES" Fatah al-Islam, a Sunni Islamist militant group led by a Palestinian, emerged in 2006 when it split from Fatah al-Intifada (Fatah Uprising), a Syrian-backed Palestinian group based in Lebanon. The group made its base in Nahr al-Bared, one of 12 Palestinian camps which are home to some 400,000 refugees in Lebanon. The army is not allowed into the camps under a 1969 Arab agreement. "They're a breeding ground for any type of mishap," security analyst Timur Goksel said. "You are in a sovereign country and you have these autonomous enclaves." The government had pledged to root out Fatah al-Islam, which members of the governing coalition say is a tool of Syrian intelligence. Syria denies any link with the group. The authorities say they have arrested Saudi, Algerian, Tunisian and Lebanese members of the group, which has little or no support among Palestinians. But army shelling has enraged camp residents. Human Rights Watch said: "The Lebanese army must take better precautions to prevent needless civilian deaths". In a Druze town near Beirut, an explosion near a shopping centre injured five people on Wednesday, security sources said. Two bombs over the last week in Beirut killed one woman and injured several people. (Additional reporting by Laila Bassam, Khaled Yacoub Oweis and Tom Perry)
