* Fresh clashes on edge of town

* Airstrikes appear to have slowed IS advance

* Turkey swept by deadly protests

* U.S. frustration at Turkish inaction

By Daren Butler and Jonny Hogg

MURSITPINAR, Turkey/ANKARA, Oct 8 (Reuters) - U.S.-led air strikes on Wednesday pushed Islamic State fighters back to the edges of the Syrian Kurdish border town of Kobani, which they had appeared set to seize after a three-week assault, local officials said.

The town has become the focus of international attention since the Islamists' advance drove 180,000 of the area's mostly Kurdish inhabitants to flee into adjoining Turkey, which has infuriated its own restive Kurdish minority -- and its NATO partners in Washington -- by refusing to intervene.

Islamic State hoisted its black flag on the eastern edge of the town on Monday but, since then, air strikes have redoubled by a U.S.-led coalition that includes Gulf states seeking to reverse the jihadists' dramatic advance across northern Syria and Iraq.

Intense gunfire could be heard on Wednesday morning from across the Turkish border.

"They are now outside the entrances of the city of Kobani. The shelling and bombardment was very effective and as a result of it, IS have been pushed from many positions," Idris Nassan, deputy foreign minister of Kobani district, told Reuters by phone.

"This is their biggest retreat since their entry into the city and we can consider this as the beginning of the countdown of their retreat from the area."

Islamic State had been advancing on the strategically important town from three sides and pounding it with artillery despite dogged resistance from heavily outgunned Kurdish forces.

TURKISH TANKS

Defence experts said it was unlikely that the advance could be halted by air power alone -- a fact that left not only Washington but also the Syrian Kurds' ethnic kin across the border demanding to know why the Turkish tanks lined up within sight of Kobani had not rolled across the frontier.

However, many Turks outside the southeast think it is far better to risk alienating the Kurds than be sucked into a ground war in Syria.

At least 12 people died and dozens more were injured on Tuesday as sympathisers of the outlawed Kurdish PKK militant group clashed with police and Islamists in towns and cities across Turkey's predominantly Kurdish southeast as well as in Istanbul and Ankara.

Authorities imposed curfews in five southeastern provinces and sent troops and tanks onto the streets of Diyarbakir, the largest Kurdish city in the region, to try to quell the unrest.

"We are here to protest too. This is repression, this is an insult to the Kurdish people," said Ibrahim Oba, 54, who had travelled to the border near Kobani to join protests against Turkish inaction.

"If Turkey had intervened, this would not have happened, but they are just watching."

An unnamed senior U.S. official told the New York Times on Tuesday that there was "growing angst about Turkey dragging its feet to act to prevent a massacre less than a mile from its border".

"This isn't how a NATO ally acts while hell is unfolding a stone's throw from their border," the official said.

While taking in Kobani's refugees and treating its wounded, Turkey -- which has the second largest army in NATO -- has deep reservations about military intervention.

LIST OF CONDITIONS

Beyond becoming a target for Islamic State, which is active along much of Syria's border with Turkey, it fears being sucked into Syria's complex civil war and perhaps even having to fight the forces of its declared enemy, President Bashar al-Assad.

With this in mind, President Tayyip Erdogan has set stringent conditions for Turkey to contemplate attacking Islamic State on Syrian sovereign territory.

On Tuesday, he reiterated those demands: the enforcement of a 'no-fly zone' over Syria near Turkey's border; the creation of a safe zone inside Syria to enable an estimated 1.2 million refugees currently in Turkey to return; and the arming of moderate opposition groups to help topple Assad.

Ankara said on Tuesday that it had, however, urged the United States to step up air strikes against Islamic State to hold up its advance on Kobani.

Abdullah Ocalan, jailed leader of the PKK, last week said a massacre of Kurds in Kobani would doom a fragile peace process with the Turkish authorities aimed at ending the group's 30-year fight for more autonomy, in which around 40,000 people have been killed.

The street protests across Turkey were already making the prospect of reconciliation with nationalists seem more remote, as protesters set fire to Turkish flags and attacked statues of the founder of modern Turkey, Mustafa Kemal Ataturk.

Selahattin Demirtas, co-chair of the HDP, Turkey's leading Kurdish party, condemned those acts, calling them "provocations carried out to prevent help coming to the east (Kobani) from the west". (Reporting by Daren Butler, Humeyra Pamuk in Turkey and Suleiman al-Khalidi in Amman; writing by Jonny Hogg; Editing by Kevin Liffey)