UPDATE 2-Bahrain says ready to talk, activist can return, Posted by Meosha Eaton

* Foreign minister says "everything can be brought to table"
* Shi'ite opposition figure pardoned, free to enter country

(Recasts with foreign minister interview)

By Frederik Richter MANAMA, Feb 24 (Reuters) - Bahrain, which has seen thousands of mainly Shi'ite protesters take to the streets, is seeking a national dialogue where everything is on the table, the kingdom's foreign minister said on Thursday. Sheikh Khaled bin Ahmed al-Khalifa said a national dialogue would include "all walks of people", including a hardline Bahraini opposition figure who was pardoned and is seeking to return home.

"What's happening in Bahrain is a new transformation, a new beginning for our reforms that started a decade ago," Sheikh Khaled told Reuters. "Everything can be brought to the table," Sheikh Khaled said, responding to questions over whether Bahrain would consider changes in its cabinet in response to the demands of protesters. Bahrain saw the worst unrest since the 1990s when seven were killed last week in protests by its majority Shi'ites that complain of discrimination and want an elected government.

Sheikh Khaled said he expected formal talks between the government and the opposition to start within days and that Hassan Mushaimaa, the London-based leader of the Shi'ite Haq movement, could return to the country. Mushaimaa has been stranded in Beirut since Tuesday after authorities blocked him from boarding a flight to Manama because his name was on an international arrest warrant. A Lebanese judicial source said Mushaimaa's passport had been seized, but he was not in custody.

"The Bahraini government has distributed his name to borders in the Arab world," Abbas al-Amran, a friend of Mushaimaa, told Reuters. "He will not let himself be arrested. He wants to take a plane and come to Bahrain as an ordinary citizen." REFORM DEMANDS Mushaimaa is among 25 people charged last year over an alleged coup plot and was being tried in absentia. But the government freed the other defendants on Tuesday as one of several gestures to try to defuse anti-government protests that at their height drew tens of thousands. A statement by King Hamad bin Isa on Monday hinted the trial would be shelved, which would let Mushaimaa return unhindered.

Lebanese authorities were checking with Bahraini authorities on whether to let him fly to Manama, the Lebanese official said. Mushaimaa's Haq party is more radical than the Shi'ite Wefaq party, from which it split in 2006 when Wefaq contested a parliamentary election. Haq's leaders have often been arrested in recent years, only to receive royal pardons. Bahrain's protesters want a constitutional monarchy instead of the existing system where citizens vote for a mostly toothless parliament and policy remains the preserve of a ruling elite centred on the Sunni al-Khalifa dynasty.

Crown Prince Sheikh Salman bin Hamad al-Khalifa has offered dialogue but has yet to persuade the opposition that the government is serious about constitutional reforms. Pro-government supporters have also staged rallies.

"Talks with representatives of Bahrain society and the Crown Prince continue and positive progress is being made towards the commencement of the national dialogue," a government statement said. The Shi'ite opposition Wefaq party, however, said there had been "no progress at all". Former Wefaq lawmaker Ibrahim Mattar said his party wanted a clear commitment to a constitutional monarchy before coming to the table. The al-Khalifa family, which has ruled Bahrain for 200 years, dominates a cabinet led by the king's uncle, who has been prime minister for 40 years since independence in 1971.