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By Mica Rosenberg and Gustavo Palencia
TEGUCIGALPA (Reuters) - The de facto Honduran government relaxed curbs on protests and opposition media on Monday as crisis talks dragged into a third week with no deal on toppled President Manuel Zelaya's return to power.
Zelaya, forced out of the country by soldiers in a June 28 coup, slipped back into Honduras last month and took refuge in the Brazilian embassy. De facto leader Roberto Micheletti responded by deploying soldiers around the embassy, imposing restrictions on press freedoms and banning large marches.
Micheletti promised to lift the emergency measures on October 5 after strong international criticism, but the decree was only finally reversed in the official gazette on Monday.
A pro-Zelaya radio station, which had its offices raided by masked soldiers after the decree, began broadcasting in the morning and a shuttered television channel was getting ready to go back on the air, the radio station's director said.
Negotiations on how to resolve Central America's worst political crisis in decades began again on Monday. The Organisation of American States' insistence that Zelaya be reinstated is the main sticking point in talks.
Micheletti's negotiators said on Friday the Supreme Court should decide if the leftist can return to office.
But the same court ordered Zelaya's June ouster, saying he violated the constitution by seeking to allow presidential re-election, and is seen unlikely to let him back.
The coup has brought back memories of Central America's ugly past of civil wars and state-backed violence in the 1970s and '80s. It is a foreign policy headache for U.S. President Barack Obama, who promised better relations with Latin America.
Zelaya called a proposal by the de facto rulers last week a "joke." "We are waiting for Mr. Micheletti to present a serious proposal. If they bring the same one presented on Friday we will take that to mean they are not interested in dialogue," Zelaya envoy Victor Meza told Reuters late on Sunday.
Some analysts say Micheletti is biding for time, hoping to stay where he is until a new president is chosen in a November 29 election. "I think they are just playing a cat and mouse game. There is no solution in the direction they are going," Honduran political analyst Juan Ramon Martinez said.
Vilma Morales, a Micheletti aide, said the court will have to consider if there are pending criminal charges against Zelaya when deciding if he can return to the presidency.
"Some question whether there will be bias (in the court). In my opinion there won't," Morales told a local news channel.
Zelaya, holed up in the heavily guarded embassy, wants Congress to decide on his return, which may mean he has rallied support among lawmakers who voted for his ouster in June.
Some in Congress criticized Micheletti for curbing civil liberties and human rights groups accuse his government of major abuses, including deaths.
A small group of pro-Zelaya protesters gathered briefly near the hotel where the talks were being held on Monday, but avoided any clashes with riot police stationed in the area.
Obama's administration has threatened not to recognise the winner of the elections if democracy is not first restored, but Micheletti's team hopes the United States and other foreign governments will buckle if the vote moves forward.
Foreign donors have pulled millions of dollars of aid from Honduras, one of the poorest nations in Latin America, but Zelaya wants tougher sanctions to destabilize Micheletti.
Honduras' fiscal deficit is expected to rise to about 4.5 percent of gross domestic product this year as tax revenues slump and the economy slows due to the crisis.
The tough economic situation could put more pressure on Micheletti to make a deal before the elections, Eurasia Group analyst Heather Berkman said in a research note.
(Additional reporting by Adriana Barrera and Frank Jack Daniel; Editing by Cynthia Osterman)

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