Thousands of Somalis have staged a rally in Mogadishu calling on Ethiopian troops to leave their country.
Anti-Ethiopian sentiment is high among many Somalis
The demonstrators burnt Ethiopian flags at a protest in the capital, which since June has been run by the powerful Union of Islamic Courts (UIC).
The UIC has vowed to expel Ethiopian troops who are deployed to assist the weak transitional Somali government.
As well as the government's Baidoa base, Ethiopian troops have also been seen in another central town, Wajid.
Ethiopia and the transitional government have refused to confirm Ethiopian troops are on Somali soil.
Placards carried by protesters at the rally in a Mogadishu stadium bore slogans such as "Down with the Addis Ababa regime" and "We are ready for holy war against Ethiopia".
Islamic leader Sheikh Sharif Sheikh Ahmed told the rally that forces loyal to the Islamic courts were ready and would be allowed to fight Ethiopians when appropriate.
"We are talking to the international community to avoid serious bloodshed and we are urging the Ethiopians to withdraw from Somalia. Patience has its own limitations," AFP news agency quoted him as telling the crowd.
Talks held in Sudan between the UIC and the transitional government - which correspondents say has little authority outside Baidoa - have been suspended.
Ethiopia, a long-term ally of President Abdullahi Yusuf, has warned the Islamic courts not to make any further military advance on Baidoa.
In Baidoa, prominent warlord Mohamed Qanyare has re-emerged more than one month after the Islamic courts ousted him and his militia from Mogadishu following weeks of bitter fighting.
Mr Qanyare, accompanied by more than 100 militiamen, drove into the town at dawn after spending several days avoiding positions held by the Islamic militias.
He has offered his support to the transitional government.
Correspondents say that Mr Qanyare is a strong political rival of President Yusuf, and distrusts Ethiopia.
The Islamic courts have wrested control across southern Somalia in recent weeks from many of the warlords who divided up the country into rival fiefdoms following the overthrow of Siad Barre in 1991.
They appear to be making considerable progress in imposing law and order in the capital.