Two weeks after Katrina turned the city into a festering swamp, the gruesome job of recovering bloated bodies continued to yield its grisly harvest, with the confirmed number of dead passing 500 and set to rise far higher.

On the ground, more pumps came online as an army of recovery crews toiled around the clock to bring life back to New Orleans.

Those who had held out in the city were upbeat.

"We are like pit bulls, we come back to what we know, and that is the city of New Orleans," said Thomas Gallacher, a 24-year resident.

Passes to cross a security cordon around the city were to be issued to help small businesses hoping to reopen.

Owners of small shops, restaurants, hotels, gasoline stations and supermarkets were to be allowed to visit their properties to assess damage, said Louisiana state police.

The city's Louis Armstrong International Airport, which has handled only humanitarian and military flights since Katrina struck, was gearing up to resume commercial flights.

In a further positive sign, the number of evacuees forced to seek refuge in shelters was also down significantly, the Department of Homeland Security said, with the number of people displaced by Katrina now 141,000, down from 208,000.

To help the effort, Louisiana, Mississippi and Alabama were crafting a multi-billion-dollar recovery plan aimed at luring business back to the region, including tax incentives and a huge bond issue, a Louisiana official said.

But the city's infrastructure is wrecked, and reconstruction will take many years and cost billions of dollars.

Many districts, especially in east New Orleans, remain under deep brown floodwaters covered with a floating sludge of trash and debris.

Some suburbs have been obliterated and medical experts say the risk of contamination is high even as the putrid waters recede.

Officials have warned it will be months before drinking water is restored.

The receding floods have exposed more bloated corpses every day. Specialised teams were taking the dead to a morgue outside the city, where experts will use dental records and DNA samples to determine their identities.

In one grisly discovery in submerged eastern New Orleans, relief workers found the bodies of 45 people in a hospital, Louisiana Department of Health and Hospitals spokeswoman Melissa Walker said.

"Forty-five corpses were retrieved from the Memorial Medical Center... The bodies were found yesterday (Sunday) but the retrieval operation is ongoing."

A fresh storm off the US east coast meanwhile prompted authorities to post warnings, put troops on standby and urge residents to leave isolated islands as tropical storm Ophelia headed towards land.

The warning suggested federal authorities were leaving nothing to chance, after fielding outspoken criticism over their preparations for Katrina and their handling of the immediate emergency response.

President George W. Bush sought to counter his critics by going to see the disaster zone first hand, touring New Orleans for the first time Monday. He had previously flown over New Orleans but not seen the devastation from the ground.

The crisis has seen his approval ratings slump to their worst levels since he took office in January 2001.

With critics also zeroing in on the Federal Emergency Management Agency's sluggish response to Katrina, chief Michael Brown announced he was stepping down, becoming the highest-profile casualty of the hurricane.

"It is important that I leave now to avoid further distraction from the ongoing mission of FEMA," Brown said in a statement, shortly after yielding to the torrent of criticism.

Reports have accused Brown of lacking emergency relief experience before he joined the agency as a Bush appointee in 2001 and said there were discrepancies in his official resume and a White House press release from 2001.

David Paulison, a former Miami fire chief with experience of Florida's devastation in the aftermath of Hurricane Andrew in 1992, was announced as Brown's replacement.

Bush had memorably stood up for Brown in the immediate aftermath of the disaster, telling him: "Brownie, you're doing a heck of a job."

Bush has refused to identify any specific failures in Washington's response to Katrina but flatly dismissed critics who have noted that most of those unable to flee the city were black.

"The storm didn't discriminate, and neither will the recovery effort," he said.

He also rejected any suggestion that National Guard deployments in Iraq had cost the rescue effort valuable time. "It is preposterous," he said. "It's pure and simple... We've got plenty of troops to do both."

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