Meanwhile, French journalist who vanished in Iraq nearly two months ago said in a video that surfaced Tuesday that she was in failing health, pleading: "Please help me. ... It's urgent."
Florence Aubenas, 43, a veteran war correspondent for the leftist daily Liberation, and her Iraqi translator, Hussein Hanoun al-Saadi, were last seen leaving her Baghdad hotel on Jan. 5. The video was dropped at the offices of an international news agency in Baghdad, and it was not possible to verify when it was made.
Hospital official Ali Hassoun said at least five people had succumbed to wounds overnight. The attack came as U.S. military deaths in Iraq climbed to one short of 1,500 since the war started in March 2003.
Hospital officials said more than 146 others were wounded in the blast, which targeted mostly Shiite police and National Guard recruits lined up for physical exams at a medical clinic.
Al Qaeda in Iraq, a group led by Jordanian-born terrorist mastermind Abu Musab al-Zarqawi, purportedly claimed responsibility for Monday's attack in a statement posted on the Internet. The authenticity of the claim could not be independently verified.
Monday's bombing presented the boldest challenge yet to Iraq's efforts to build a security force that can take over from the Americans.
In other developments:
The group said it targeted recruits for the Iraqi security services, which it referred to as "apostates," but did not mention the shoppers and other bystanders killed in a nearby market.
Shouting "no to terrorism" and "no to Baathism and Wahhabism," more than 2,000 people gathered outside the medical clinic where the suicide car bomber blew himself up as police and army recruits were waiting to take physical examinations.
Wahhabism is a particularly austere form of Sunni Islam that arose in Saudi Arabia at the start of the 19th century, while the Baath party was the political organization that ran Iraq under Saddam Hussein.
Many of the corpses, charred or dismembered, were unrecognizable, stuffed into white plastic bags. Other bodies lay on the ground in the open because the overwhelmed morgue had no place to store them.
Funeral processions are expected to be held in Hillah and many of the dead will be taken to the holy Shiite city of Najaf for burial later Tuesday.
The explosion in Hillah, a largely Shiite Muslim town about 60 miles south of Baghdad, was so powerful that the only thing remaining of the bomber's car was the twisted wreckage of the engine block.
Dozens of people stepped through small lakes of blood that pooled on the street to retrieve shattered limbs, severed feet and hands.
The bombing comes at a time when the Sunni Arab insurgency is trying to disrupt the formation of a new government set to be led by majority Shiites for the first time in modern history. Iraqi forces are eventually supposed to take over responsibility for security — the key to Washington's exit strategy — but they remain under-equipped, ill-prepared to fight insurgents and often make easy targets.
Despite the bombing, Iraqi officials say they are making progress against the insurgents, reports CBS News Correspondent Kimberly Dozier. They appear especially encouraged by the high-profile arrest of Saddam Hussein's half-brother, Sabawi Ibrahim Al-Hassan, over the weekend.
The Shiites have so far refrained from striking back at the insurgents — mostly at the behest of their most revered leader, Grand Ayatollah Ali al-Sistani, who is widely credited with bringing them this far. Al-Sistani wants nothing to impede the Shiites from gaining the political power they have craved in Iraq, and will not allow them to engage in a sectarian war.
"We sacrificed a lot of blood, we have to be patient and not drift into a civil war as Ayatollah al-Sistani has said," said Jalal Eddin al-Sagheer, a senior cleric and member of the Supreme Council for the Islamic revolution in Iraq.
Abdel Aziz al-Hakim, the leader of the United Iraqi Alliance, recently hinted that the Shiites were waiting to take power before dealing with the insurgency. He indicated that a first step would be to identify and purge the security services of any insurgency sympathizers.
"We must depend on the sons of the Iraqi people who believe in the new Iraq, and not on those bad elements that infiltrated the security circles and turned into a problem," al-Hakim told The Associated Press on Sunday. "We can't solve the security issue unless we reconsider the internal structure, to spot those bad elements."
The main Shiite clergy-backed United Iraqi Alliance is seeking the support of other parties to achieve the two-thirds majority required for forming Iraq's new government.
Finding a way to end the largely Sunni insurgency and soothe the fears of Sunnis who have dominated the Iraqi political sphere for centuries will be the most crucial and complex task for the new government.
There are no official figures available, but an AP count found that 234 people were killed and 429 people were injured in at least 55 incidents from Jan. 1 until election day. Casualties rose in February, which saw at least 38 incidents that resulted in least 316 deaths and 447 injuries.
The Hillah attack took place about 9:30 a.m., when the bomber drove into a crowd of hundreds who had gathered for medical checkups, setting off the blast.
There was no claim of responsibility for the attack. Police in Babil province said "several people" were arrested, but gave no details.