Stephen Fitzpatrick – The would-be guerilla fighters playing hide-and-seek in misty highlands far beyond East Timor's capital, Dili, are a mixed lot but they have one thing in common: they're prepared to die violent deaths to get what they want.

They have issued a demand that the Government of Prime Minister Mari Alkatiri be sacked and the country's tiny armed forces be made to hand in its weapons. Non-compliance will mean armed action, they promise.

Their threats come after they were summarily sacked, which they claim was due to ethnic-based discrimination in the military.

The formation of a commission to examine their complaints has done nothing to cool down the situation. The 595 soldiers and hundreds more of their supporters are now constantly on the move in ranges far to the west of Dili, in an odyssey that holds for many the romance of the former armed struggle that so starkly moulded East Timor's identity.

President Xanana Gusmao – hero of the 24-year guerilla war against Indonesian occupation, and the only authority figure this growing band of armed men trusts – is playing chicken, apparently hoping the sabre-rattling does not turn to war.

He parlayed an extra day's grace out of the soldiers' belligerent 48-hour ultimatum, issued late on Friday; then, appearing in the capital on Saturday morning pleading for the thousands of Timorese who fled the city last week to return, Gusmao point-blank refused to acknowledge the rebels' terse letter.

But the aggrieved soldiers, all from the country's west and under the leadership of former lieutenant Gastao Salsinha – a small, watchful man who bears the responsibility of revolution with some reluctance – are far from the only factor in this deadly board game.

Behind them is a powerful group of former commanders in the one-time underground army, Falintil, who put down their guns after Jakarta's forces were finally sent packing in 1999. The problem is, those weapons would be very easy to pick up again – or bequeath to a new generation – and the grizzled generals are restless.

They are the ones who drafted Friday's declaration for Salsinha to sign, and they passionately believe the East Timor they are living in is not the one they fought for.

They claim it has been hijacked by political and business interests, and with only days to go until the general congress of Fretilin, the one-time political wing of Falintil and now the party of government – tensions are as high as they have ever been.

The congress will deliver almost certain power in elections next year to a small clique of leaders, and many observers see the current crisis, with its threat to spill into civil war, as a direct side effect of that jockeying for power.

Then there is the small band of military police who absconded last week in full battle gear, taking with them at least two military transport vehicles loaded up with weapons, and who are now tensely guarding the winding mountain roads around Salsinha's various hiding places.

"We are defending the East Timorese people – all of them," says one of their leaders, Alfredo Reinado. "We have not left the FDTL (East Timorese defence force) but we oppose the way it has been used."

The enemy they are waiting for will come from Dili wearing the same uniforms as they do. The question of whether East Timor should have an army at all is one of the main flashpoints for the current crisis.

Critics – the ex-Fretilin generals, largely – say the issuing of a shoot-on-sight order several hours after rioting convulsed the capital more than a week ago was clear evidence that it should not. The only force needed for national security is the police, they say.

"On that day (April 28), the people of East Timor realised the armed forces were their biggest enemy," explains Germinino Amaral, a genial giant who has developed coffee interests in the Ermera district, west of Dili, since East Timor gained its independence.

There are still conflicting reports about how – and when – that order was given, but stories are accumulating of perhaps dozens of deaths, and bodies being scooped up as they fell.

The official government line is still that only four people died, during a demonstration in support of the 595 soldiers outside the main government building and in a subsequent riot at a nearby outdoor market. "According to the reports, the Prime Minister gave an order to (armed forces commander) Lere Anan Timor to 'keep the peace'.

That's when people started being shot at. That's why they're so upset," says Amaral. "This was an army formed from the people. How can it start shooting at those same people?" He was one of about 20 former Falintil chiefs and other leaders from among the Loromonu ethnic group dominant in the country's west who gathered at the end of last week to draft the demand delivered to Gusmao in the early hours of Saturday.

Another of that group is Eduardo Dusae, who – with the practised fluency of a guerilla fighter versed in the rhetoric of struggle – denies that he wants war, even as he insists it is his right.

"For 24 years, we opposed Indonesia not with weapons, bullets, tanks or planes, but with our own rights," Dusae declares.

"With our political rights and with the right for independence. We will not attack Dili; but we will defend the unity and integrity of our nation. There are two armed groups in East Timor right now, and whoever has the power to deal with that – whoever can take charge of the weapons in order to solve this problem – that's who must seize the situation.

Amaral is more sanguine. "Rather than more civilians dying pointless deaths, we might as well take up arms in support of the people," he says, then, playing on an old proverb: "If someone has bad intentions towards me, before he dies I must stand in opposition to him."

Yet another former Falintil commander and co-formulator of the rebels' war declaration, Gabriel Ximines, says the East Timorese people will support this new struggle in "whatever way they can – logistics, and so on – to resolve the situation".

"Salsinha is defending what's written in the constitution, so we support him. We just won't give support in any destructive ways."

Ximines insists that since there has already been armed engagement over the issue, "the President now has the constitutional power to ask for international involvement".

All of the rebel soldiers' backers are keen to see an international force take control in East Timor, as the UN did in the wild period immediately after the 1999 independence referendum. Over lunch in a guarded hideout they express extreme interest in the detail of John Howard's statement on Friday that Australia stands ready to offer assistance.

But the situation may already be well beyond that. An entire new generation of East Timorese, who spent their youth in the struggle and who now face chronic unemployment and economic shortages, could be at the tipping point for becoming the standing army in a new struggle.