The president handed over command of one of the world's largest armies to the hand-picked Gen. Ashfaq Kayani, and appeared to blink back tears as he bid farewell to the forces he sent into the U.S.-led war against terrorism.

"I'm proud of this army and I was lucky to have commanded the world's best army," Musharraf said, a day before he is set to be sworn in as a civilian president. "I will no longer command ... but my heart and my mind will always be with you."

The move, which ended his more than 40 years in the army, casts him into uncertain waters, with rivals snapping at his heels and the militants he has sworn to fight after the Sept. 11, 2001, attacks on the United States contesting ever more of his country's territory along the Afghan border.

Musharraf's retirement from the military has been a key opposition demand and the move may help defuse a possible boycott of parliamentary elections in January by parties opposed to his rule.

Dominant figure
Musharraf has served as president while retaining his post as head of the armed forces, which helped him dominate this Muslim nation of 160 million people throughout the eight years since he seized power in a bloodless coup.

But Nawaz Sharif, the prime minister Musharraf ousted in 1999, has kept up his rhetoric against the general, insisting on Tuesday that he undo steps taken under a state of emergency imposed to prolong his rule.

Still, Sharif said Musharraf's conversion will make "a lot of difference" and that he would only refuse to participate in the vote if all opposition parties agreed to do so as well.

Musharraf faces increasingly adamant calls from critics at home and abroad to lift the emergency imposed Nov. 3 and make good on a long-standing pledge to restore civilian rule.

To calm the turmoil, he has released thousands of opponents rounded up under his extraordinary powers and let all but one of Pakistan's independent news channels go back on the air.

Final review
On Wednesday, hundreds of senior officers, politicians and other civilians watched from the stands as an unsmiling Musharraf, wearing a phalanx of medals and a green sash across his uniform, reviewed the ranks to the strains of "Auld Lang Syne."

"(You) are the saviors of Pakistan," Musharraf said in an emotional final speech to the troops.

Musharraf insists his continued rule as president is essential for Pakistan to remain stable as it reverts to democracy.

To secure his position, Musharraf has abrogated the constitution and purged the Supreme Court, which was about to rule on the legality of his victory in a presidential election held in October.

Pliant judges in the retooled court last week dismissed opposition complaints that Musharraf's retention of his military role disqualified him from running for elected office.

However, she and Sharif are also fierce political rivals, and there are doubts that they can forge a united front to force Musharraf out completely.

Bhutto says she is reluctant to leave the field open to pro-government parties and as late as Tuesday, her spokesman questioned whether Musharraf would make good on his promise.

"Let us see what happens tomorrow because he has reneged on his promise in the past," Farhatullah Babar said.

Kayani, a former chief of the powerful ISI intelligence service, is widely expected to maintain the army's pro-Western policies even as he tries to repair the image of a force damaged by its direct involvement in politics.

An official insisted Tuesday that Musharraf's switch would bring no change in resolve against terrorism.

"Uniform or no uniform, it would not impact our war on terror," Interior Ministry spokesman Javed Iqbal Cheema said.

Sharif, who returned from exile in Saudi Arabia Sunday, went on CNN in September to calm doubts about his own commitment to battling the Taliban and al-Qaida.

"You can't fight terror the way Mr. Musharraf is fighting," he said at the time, adding that the Pakistani leader "needs the threat of terror for his own survival. We will fight out of conviction."

But Sharif, a conservative with good relations with Pakistan's religious parties, is now reaching out to the many Pakistanis who disagree with sending the army to fight militants along the Afghan border and who deride Musharraf as a U.S. stooge. Civilians as well as militants have died in those operations and occasional U.S. missiles strikes on targets inside Pakistan.

"If the outside world declares somebody a terrorist, we shall not act on it blindly," Sharif told reporters at the Press Club in his home city of Lahore. "We are against extremism and terrorism. But it doesn't mean to allow foreign countries to bomb our people."

That posture could entice some votes away from Bhutto, who has said she might let U.S. troops strike at Osama bin Laden if the al-Qaida leader is found to be hiding in Pakistan.

Can Sharif challenge Musharraf or Bhutto?
It remains unclear whether Sharif can assemble a slate of candidates strong enough to challenge the pro-Musharraf ruling party or Bhutto's party in January.

Still, Sharif gave the strongest hint yet on Tuesday that he would actually take part.

"If all political parties agree, I think we should boycott the polls because it is a lethal weapon," Sharif said. "But if we don't get an agreement we should try to reach our objectives in the polls."