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This is really weird. Can you figure out what happened?

Two key question seem to be a) were UK Special Forces shooting Iraqi police or were they not and b) were they in the jail or in the custody of local militiamen elsewhere in the city?

Let's ask the AP what happened:

A spokesman for Iraq's prime minister, meanwhile, described as ''very unfortunate'' an incident in the southern city of Basra in which British armored vehicles broke down the wall of a jail to try to free two British soldiers later found in the custody of local militiamen elsewhere in the city.

''My understanding is, first, it happened very quickly. Second, there is lack of discipline in the whole area regarding this matter,'' said Haydar al-Abadi, a spokesman for Prime Minister Ibrahim al-Jaafari. ''It is (a) very unfortunate development that the British forces should try to release their soldiers the way it happened.''

British authorities said their soldiers were being held illegally and that their captors had refused an order from the Iraqi Interior Minister for their release.

...

The latest violence in Basra began early Monday when authorities reported arresting the two Britons, described as special forces commandos in civilian clothing, for allegedly shooting two policemen, one of whom reportedly died.

Perhaps we can try the WaPo:

In London, authorities said the two commandos were released after negotiations. But the BBC quoted British defense officials as saying a wall was demolished when British forces went to "collect" the men

Well, there's always the NYTimes:

Two British soldiers working under cover were arrested Monday in the southern city of Basra and then freed as a British armored vehicle blasted through the wall of their jail after an angry crowd began rioting outside, an Interior Ministry official said.

The official said that the soldiers were undercover officers dressed as Iraqis and that Iraqi police officers had arrested them after the men fired at a traffic police officer.

Then there's some non-MSM reporting.

This refers to a Al Jazeera broadcast that the commandos were driving a booby trapped car.

This suggests the commandos were trying to plant explosives (it's part of a meme which came to my attention several months ago).