Pakistan's presidentlast week in hopes of calming Swat, where some two years worth of clashes between the Taliban and security forces have killed hundreds and displaced up to a third of the one-time tourist haven's 1.5 million residents.
The agreement covers roughly one-third of Pakistan's North West Frontier Province, a strategic stretch along the Afghan border and the tribal areas where al Qaeda and the Taliban have strongholds.
Under the deal, the provincial government agreed to impose Islamic law, and the Taliban agreed to a cease-fire. Supporters say the deal will allow the government to reassert control. However, critics, including the White House, have slammed it as an affront to democracy and human rights, and say it hands Islamist insurgents a sanctuary.
In a bold move just days after the government approved the deal, the Taliban's senior cleric in Swat effectively declared total judicial independence in the region, saying Islamic law (Shariah) rulings handed down by the militants would not be subject to challenge in the country's official court system.
The critics also have warned that Swat could be the first domino to fall to the Taliban - and that Islamabad, capital of the nuclear-armed nation less than 100 miles away, could eventually follow.
In recent days, the Swat militants have set their sights on adjoining Buner district, sparking at least one major clash with residents.
Istiqbal Khan, a lawmaker from Buner, told The Associated Press that the militants had entered the district in "large numbers" and started setting up checkpoints at main roads and strategic positions.
"They are patrolling in Buner, and local elders and clerics are negotiating with them to resolve this issue through talks," he said.
The militants in Buner also are using radio airwaves to broadcast sermons about Islam, and have occupied the homes of some prominent landowners, said a police official who insisted on anonymity because he was afraid of retaliation. He said the militants have also warned barbers to stop shaving men's beards and stores to stop selling music and movies.
The militants have established a major base in the village of Sultanwas and have set up positions in the nearby hills, the police official said. Militants also have taken over the shrine of a famed Sufi saint known as Pir Baba, he said.
The provincial government's chief executive warned that authorities would eventually take action if the militants didn't leave Buner.
"They must pack up and go home," Amir Haider Khan Hoti told state-run television.
Since the provincial government agreed to the deal in February, Taliban fighters had adopted a lower profile and stopped openly displaying weapons in Swat as part of a cease-fire.
But on Tuesday, upon the radio-broadcast orders of Swat Taliban chief Maulana Fazlullah, the militants began roaming parts of the valley with rifles and other weapons. An AP reporter saw the patrols in Mingora, the valley's main city.
Residents from nearby towns in Swat said militants were setting up checkpoints on several roads. The residents requested anonymity out of fear for their lives.
Fazlullah ordered his fighters to withdraw again in a broadcast on Wednesday. He didn't explain why.
Swat Taliban spokesman Muslim Khan could not immediately be reached for comment. In a recent interview, Khan said al Qaeda leader Osama bin Laden and other militants aiming to oust the U.S. from Afghanistan would be welcome and protected in Swat - a statement the government condemned.
Pakistani officials complain that India and other regional rivals are fomenting trouble in its border regions.
On Wednesday, Interior Ministry chief Rehman Malik accusedof harboring a separatist leader from Pakistan's restive Baluchistan province. Malik claimed that Bramdagh Bugti was living in Kabul and that phone taps implicated him in the kidnapping in Baluchistan of an American U.N. worker freed earlier this month.
Speaking in Parliament, Malik also alleged that Baluch rebels were being trained at camps in Afghanistan and implied that they were supported by India and Russia.
American officials acknowledge that such tension and mistrust is hampering efforts to combat the Taliban.