* OAS chief Insulza insists Zelaya be reinstated
* Police break up pro-Zelaya protest with tear gas
* Zelaya accuses Micheletti of stalling for time
(Adds quotes, details)
By Frank Jack Daniel
TEGUCIGALPA, Oct 7 (Reuters) - Envoys of ousted Honduran President Manuel Zelaya and the country’s de facto leader began talks on Wednesday as diplomats insisted the deposed president be reinstated and police fired tear gas at protesters.
Foreign ministers and the head of the Organization of American States are overseeing the highest-level dialogue in the coffee-growing nation since Zelaya was bundled into exile at gunpoint three months ago, but a solution to the crisis seemed distant.
Zelaya followed the negotiations from the Brazilian embassy, where he has been trapped by troops since slipping back into Honduras last month.
Interim leader Roberto Micheletti chided diplomats from the hemisphere for isolating the poor coffee-growing country after the putsch.
Shortly before the meeting, police fired volleys of tear gas to disperse several hundred people who were marching past the U.S. Embassy in support of Zelaya, a leftist former logging magnate.
Police and soldiers armed with clubs and automatic weapons chased demonstrators who shouted “Help us, OAS.” Two people were injured, one by a rubber bullet and another by a gas canister, a local hospital said.
Zelaya and the OAS mission insist his return to power is a non-negotiable demand to give legitimacy to presidential elections set for November.
“Those who thought it was possible to depose a president and normalize life in the country before starting an election campaign should realize that this has not been possible,” said OAS chief Jose Miguel Insulza.
In a live television broadcast Micheletti told the envoys, including Thomas Shannon, the top U.S. diplomat for the region, that only “an invasion” would stop the elections.
He said Zelaya should stop insisting on returning to office and choose a presidential candidate to support.
“Micheletti has no intention of handing the presidency back to Zelaya,” said former Honduran presidential candidate and political analyst Jose Ramon Martinez.
A Micheletti representative said international sanctions slapped on Honduras since the coup had cost the poor country $400 million.
A presidential election is scheduled for Nov. 29 but critics say curbs on media and public gatherings imposed by Micheletti mean the campaign will not be fair.
Zelaya said Micheletti agreed to the talks only to fend off international criticism. “They do not have the least intention of reversing the coup, they are just playing for time,” he told the Telesur television channel from his embassy refuge.
As police scattered protesters, children in a nearby school sang, “United, the people will not be defeated,” a traditional Latin American leftist chant.
Zelaya was toppled after becoming close to Venezuela’s President Hugo Chavez, whom powerful conservatives in Honduras say was advising Zelaya to extend his presidential term.
Micheletti took power after the June 28 coup and wants his rival jailed. He has said political amnesty is on the table, but did not mention a possible return to office for Zelaya.
Peter Kent, Canada’s junior foreign minister, said the OAS mission was pushing to have Zelaya moved from the Brazilian embassy, where he sleeps on an inflatable camping mattress.
Honduras’ de facto government contends that Zelaya’s ouster was legal because he violated the constitution.
Honduran rights group Cofadeh says 10 Zelaya supporters have been killed since June in violence linked to the coup.
For most of the 20th century, coups and military governments were common in Honduras. U.S. banana importer Sam Zemurray helped bring President Manuel Bonilla back to power in 1912 in return for favorable business conditions. (Additional reporting by Gustavo Palencia, Miguel Angel Gutierrez and Ignacio Badal in Tegucigalpa and David Ljunggren in Ottawa; editing by Chris Wilson)