MALISEVO, Yugoslavia (AP) _ Gunmen from the separatist Kosovo Liberation Army walked around openly in this bustling market town, greeted by an occasional salute from grizzled old men in domed white fezzes.

A man standing on a wheelbarrow covered the Cyrillic lettering of the Serbian street signs with yellow paint Monday; Albanian is the only language spoken.

Situated about 12 miles from the Albanian border, Malisevo is technically part of Serbia, Yugoslavia's dominant republic. But it is functioning as a supply hub and refugee center for ethnic Albanians fighting for independence.

``Those guys with guns and uniforms are fighting for our rights,'' Aziz Mazreku, a high school gym teacher sipping tea at a cafe, said when asked about the mix of fighters and shoppers on the dusty streets.

As the Serbs continue their anti-insurgency campaign _ evidently undaunted by NATO planes flying Monday in neighboring Macedonia and Albania _ some fear it's just a matter of time before they turn their sights to towns like Malisevo.

Already, fighting is creeping closer. Spent bullet casings littered the road just a few miles north of town, the remains of weekend clashes.

Not much farther along, Serb forces gathered at roadblocks and positioned their heavy guns and armored vehicles in the hills.

The NATO exercise was meant to convince Yugoslav President Slobodan Milosevic that the West was serious about its demand for him to change his hard-line Kosovo policy, which has sent tens of thousands of ethnic Albanian refugees fleeing their homes. More than 300 people have died since March.

Villages attacked by the Serbs are now ghost towns, including Komorane, halfway between Malisevo and the provincial capital of Pristina

Only Serb police and stray animals were on the streets after a Serb attack a few days ago.

The burnt-out shell of a truck was crumpled on the side of the road. Windows were smashed and stores looted. Walls of houses were covered with freshly painted Serb nationalist graffiti.

The Yugoslav government was conspicuously silent about the West's military display _ perhaps because Milosevic was off to Moscow, a traditional Serb ally, for talks today with Russian President Boris Yeltsin.

In Pristina, opinion among Kosovo Serbs was divided. Some were devoted to the fight to keep the province, considered part of Serbia's historic heartland.

``Let NATO come, let just a single plane fly over our skies _ we'll all be up to our knees in blood,'' said unemployed Biljana Mitrovic, 30.

Others were ready to quit.

``I simply don't care. If this keeps on much longer, I'll pack up my stuff and move to Serbia,'' said Branko Rakic, a clerk in a state-owned company.

Mahmut Bakali, a member of Kosovo's ethnic Albanian negotiating team set up to talk with Serbian authorities, said he hoped Milosevic would heed NATO's warning so that ``serious negotiations on the status of Kosovo can begin.''

But at the Express Cafe in Malisevo, residents held out little hope for a negotiated settlement. They say they respect their elected leader, Ibrahim Rugova, but the KLA calls the shots now _ at least in their town.

``We are very determined about the war,'' said Mazreku. ``We are fighting for our rights. We want independence.''

But despite its stepped-up attacks on Serb forces, the militants remain for the most part an unknown quotient. Some drive around in flashy all-terrain vehicles, carrying automatic weapons and miniature walkie-talkies. Others ride in hay carts pulled by tractors, holding decades-old rifles.

None of the KLA fighters would agree to be interviewed. The shadowy group named a spokesman last week, but he has yet to make any public statement.