Allawi blamed the coalition for poor security in Saturday's ambush about 95 miles east of Baghdad.
"It was a heinous crime where a group of National Guards were targeted," Allawi said. "There was great negligence on the part of some coalition forces. It seems there was sort of determination on doing Iraq and Iraqi people harm." and a U.S. airstrike in Fallujah killed an aide to Jordanian terrorist Abu Musab al-Zarqawi, the military said.
An Iraqi insurgent group, meanwhile, said on a Web site it had taken 11 Iraqi National Guard soldiers hostage. They were seized on a highway between Baghdad and Hillah, according to the Internet posting by the militant group, the Ansar al-Sunnah Army. The posting included the names of all 11.
The authenticity of the posting could not immediately be verified. The movement claimed responsibility for a number of attacks and hostage takings, including the kidnap and murder of 12 Nepalese, who were seized in August.
In other developments:
The attack on the soldiers, who were returning home on leave, occurred on a remote eastern highway when their buses were stopped by insurgents at a fake checkpoint, police and defense officials said.
Some of the bodies were found in rows — shot execution-style in the head, the Defense Ministry said. Other bodies were found on a burned bus nearby.
Allawi told the Iraqi National Council: "You should expect an escalation in terrorist acts."
The U.S. military said the early-morning raid in Fallujah struck a safe house used by al-Zarqawi's group. U.S. forces have stepped up aerial and artillery assaults on Fallujah in recent weeks in an attempt to root out insurgents.
Fallujah, 40 miles west of Baghdad, fell under rebel control after the Bush administration ordered Marines to lift their three-week siege of the city in April.
The United States has offered a $25 million bounty for the capture or killing of al-Zarqawi, whose group has claimed responsibility in numerous suicide bombings and beheadings of foreign hostages, including three Americans.
"Recent strikes and raids targeting the Abu Musab al-Zarqawi network have severely degraded its ability to conduct attacks," the U.S. statement said. It did not identify the slain al-Zarqawi aide.
In London, Iraqi Foreign Minister Hoshyar Zebari said the interim government is working to achieve a political solution to the military standoff around Fallujah.
"We are trying to exhaust all political channels and avenues before any final decision is made," Zebari told British Broadcasting Corp. radio. "Fallujah is one hot spot that we need really to resolve before getting to elections" scheduled for January.
A masked gunman, meanwhile, warned in a videotape that insurgents will attack all Iraqi and multinational military and civilian targets with "weapons and military tactics they have not experienced" if U.S. troops try to storm the city.
In the videotape obtained by Associated Press Television News, the gunman, dressed in an old-style Iraqi army uniform, read the statement on behalf of the "factions of the Islamic Resistance Movement in Iraq."
The speaker, who appeared with seven other masked, armed men, accused the Iraqi government of "aborting a peaceful solution with the people of Fallujah."
He warned all Iraqi military personnel and government employees to quit their jobs, otherwise they "will be permissible targets for our fighters."
In Ramadi, insurgents attacked two U.S. Army convoys Tuesday with roadside bombs, the military said. No U.S. troops were injured but some Iraqi civilians were wounded, Lt. Col Lyle Gilbert said.
Ramadi, 70 miles west of Baghdad, is in the insurgent-heavy Sunni Triangle.
Meanwhile, Iraqi officials said an investigation was launched into the deadly ambush of about 50 U.S.-trained Iraqi soldiers Saturday.
"The investigation is mainly to know whether there was any information leakage," Defense Ministry spokesman Salih Sarhan said.
Iraqi police and soldiers have been increasingly targeted by insurgents, mostly with car bombs and mortar shells. However, the fact that the insurgents were able to strike at so many unarmed soldiers in such a remote region suggested the guerrillas may have had advance word on the soldiers' travel.
"There was probably collusion among the soldiers or other groups," Diyala province's Deputy Gov. Aqil Hamid al-Adili told Al-Arabiya television. "Otherwise, the gunmen would not have gotten the information about the soldiers' departure from their training camp and that they were unarmed."
Last week, a U.S. defense official in Washington described Iraq's security forces as "heavily infiltrated" by insurgents, saying some Iraqi soldiers and police have developed sympathies and contacts with the guerrillas. In other instances, infiltrators were sent to join the security services, the official said on condition of anonymity.
Al-Zarqawi's group, renamed al Qaeda in Iraq, claimed responsibility for the attack on an Islamic Web site, but there was no way to verify its authenticity.
Dozens of suspect police officers and Iraqi soldiers have been arrested for insurgent ties, although U.S. and Iraqi officials declined to release numbers.
In September, U.S. troops arrested a senior Iraqi National Guard commander, Lt. Gen. Talib al-Lahibi, for insurgent ties. Al-Lahibi was arrested in Diyala province near where Saturday's massacre occurred.
Also, U.S. troops arrested an Iraqi National Guard battalion commander, Col. Daham Abd, allegedly for providing ammunition, money and information to the insurgents near the northern city of Kirkuk.
A mortar attack Oct. 19 on an Iraqi National Guard compound near Baghdad is being viewed as a probable inside job. The attackers apparently knew when and where the unit's members were gathering and dropped mortar rounds in the middle of their formation. At least four Iraqis were killed and 80 others were wounded.