In Fallujah, while the gangs have been driven off the streets, hundreds continue to resist from hiding places (tunnels, hidden rooms, burned out buildings). American troops are searching the city carefully, and flushing these people out of some 22,000 buildings. There are many gunmen operating outside of Fallujah, in Anbar province. This is a Sunni Arab stronghold, and if the gangs can be driven out, other parts of Iraq are even more hostile to them.
Speaking of hostility; the reliance on terror, and the continued death of so many Iraqis from al Qaeda and Sunni Arab attacks, has terrorized many Iraqis, but it has made many more angry, and determined not to give in. Iraqis still show up at work in coalition bases and government jobs. Applicants still line up for jobs as policemen and soldiers. Iraqis still blame the Americans for all the problems, but are beginning to realize that it is up to them. This is a scary concept. Taking responsibility is not a popular activity in Iraq. When Saddam ruled the country, no one wanted to be responsible for anything, because if anything went wrong, you could get killed. So Saddam got all the credit for whatever went right, and foreign enemies (especially the United States, or United Nations) got blamed for all the stuff that did not work. The conflict in Iraq is about more than fighting over power, its a struggle for how the Iraqi character will be redefined. The Sunni Arabs want to go back to Baath Party dictatorship, Abu Musab al Zarqawi and his al Qaeda killers want a religious dictatorship. America offers democracy. It would be so simple if all it came down to was making a choice. In this case, Iraqis have to decide which future they want to risk their lives for. The elections are being held next month, and war crimes trials of Baath Party officials are to start next week.
With Fallujah shut down as a Baath Party/al Qaeda sanctuary, the fighting in Iraq has shifted to gang warfare. American intelligence efforts have identified dozens of different Sunni Arab gangs operating in different parts of central Iraq. Unable to get many Sunni Arabs to actively cooperate with them in most areas, the troops just go out and hunt down the hostile gunmen. In most parts of Iraq, non-American troops have a much easier time of it with cooperative Iraqis. But the Sunni Arabs will continue to actively resist until armed and determined Iraqis come in and shut them down.