The report - contradicting many claims by the US administration - is based on briefings by Paul Bremer, the US de facto governor of Iraq; military commanders, unnamed intelligence officers and David Kay, the American who leads the hunt for Saddam's alleged weapons of mass destruction. It says attacks on Americans by Sunni Iraqis will continue "until the day the US leaves".
US army commanders are also learning how Saddam Hussein forced his officers to read Black Hawk Down - the account of the shooting down of US helicopters in Mogadishu during America's disastrous intervention in Somalia in the early 1990s - to convince them the US would leave if it suffered major casualties. The Iraqi resistance movement is believed to have a war chest of up to $1bn - with a further $3bn hidden in Syria - and it is paying between $25 and $500 for each attack on US forces.
It also says 95 per cent of the threat is from former regime loyalists and that suicide bombings are being carried out largely by foreigners.
The report, compiled by the prestigious Centre for Strategic and International Studies (CSIS), is all the more devastating because of the unusual level of access provided to its author, Dr Anthony Cordesman, a specialist on Iraq. He concludes that US soldiers are dying because of the ideological approach of the administration, and "four years into office, the Bush national security team is not a team".
Mr Cordesman accuses the administration of preparing the ground for "a defeat by underplaying the risks, issuing provocative and jingoistic speeches, and minimising real-world costs and risks." Senior US officials were also deeply scornful of claims by administration officials that Saddam and his former aide Izzat Ibrahim al-Douri are orchestrating guerrilla attacks.
Mr Bremer is quoted as saying that Saddam is felt "to be isolated and on the run. Douri [is] felt to be dying".
US military officials said the leadership of the resistance is coming from former generals and colonels from the old Iraqi army, now disbanded, who see no future for themselves. This means that US successes in picking up the remaining 15 senior Baath party officials and military leaders pictured on the 55 playing cards will have no effect on the strength of the resistance.
The report makes clear that there is no long-term future for the US military in Iraq: "Some Sunnis and others will always treat the US as "antibody" and cannot even get intelligence up to the point where [it] will stop all attacks."
Dr Kay says that "Iraq was actively violating accords during later 1999 to 2003". But despite a prolonged and vastly expensive search for chemical weapons there was "no evidence of weapons production" though Iraq could have produced sarin in two years and mustard gas in two months.
Interviews with former Iraqi commanders show that while none of them had chemical weapons under their control they believed that other units did have chemical weapons.
Mr Bremer said that there was no evidence of a direct role by al-Qa'ida, though he felt that the devastating suicide bombs were carried out by non-Iraqis. But he made clear that he had "no hard intelligence to confirm that they were foreigners".
Mr Bremer told the CSIS that "the most critical problem is intelligence" on local guerrillas and possible foreign supporters. He said: "We do not have a reliable picture of who is organising attacks, and the size and structure of various elements." He suspected that there was local co-ordination and possibly greater co-ordination on a regional level. There were estimated to be at least eight resistance cells in Baghdad, each with some 25 members.
The report, based on a visit to Iraq by Dr Cordesman earlier this month, entitled Iraq: Too Uncertain To Call, says the army is confident it can contain guerrilla attacks but says they are becoming more sophisticated and tactics are changing.
Dr Cordesman suggests the Coalition Provisional Authority should abandon its heavily fortified headquarters in Saddam's old Republican Palace in central Baghdad. He says: "The CPA's image is one of a foreign palace complex replacing Saddam's and far too many CPA Americans in Baghdad are talking to Americans who should be working with Iraqis." He says, after extensive talks with US officers in the main combat divisions, that the CPA is seen as an over-centralised bureaucracy, isolated from the military, relies too much on contractors "and is not realistically evaluating developments in the field."
Dr Cordesman points to an important flaw in US planning since mid-summer when the Interim Governing Council was established as the Iraqi face of the occupation. He says that it has delayed "nation-building" in Iraq because of divisions, personal ambitions and lack of local following. A critical question here, which may determine the success or failure of President Bush's plan to create a provisional Iraqi government with real legitimacy, is how far the failings of the council are carried over into a new body.
Iraqi politicians independent of the US-appointed governing council interviewed by The Independent all believe that the council wanted to delay elections because its members feared they would not be elected. "They just want time to loot the country and then get out," said one Iraqi leader bitterly.
There is little in the track record of the US administration to suggest that Dr Cordesman's recommendations will be carried out, particularly at a time when Washington wants to show results on the ground in Iraq in the months before the presidential election.
One problem is that the US army is designed for major combat. It does not have the resources or training for the conflict it is now fighting. "The army as a whole does not have the MPs, civil action, intelligence, and trained counter-insurgency assets it needs."
The report concludes that there is an overall problem with the US administration's advocacy of "democracy" in the Middle East. "It is largely advocating undefined slogans, not practical and balanced specifics.'' It was often seen as showing contempt for Arab societies, or as a prelude to new US efforts at regime change.