By Sami Aboudi and Mohammed Ghobari

SANAA (Reuters) - Yemeni leaders trying to end political upheaval and separatist demands met to chart a new constitution on Monday, the scale of their task underscored by protesters who marched in their tens of thousands in the south to demand their own state.

Stabilizing Yemen, a U.S. ally grappling with al Qaeda militants, southern secessionists and northern rebels, is an international priority due to fears of disorder in a state that flanks oil superpower Saudi Arabia and major shipping lanes.

Yemen has struggled to restore normality since President Abd-Rabbu Mansour Hadi was elected in February 2012 following a year of Arab Spring-style protests that forced his predecessor Ali Abdullah Saleh to step down after 33 years in power.

Hadi, opening a so-called national dialogue conference expected to last six months, said the restive south was the main challenge facing the discussions.

"Any attempt to impose a vision to deal with this (southern) issue by force will lead to big failure and big dangers," he said.

The conference would place the first building blocks of a "new, unified, safe and free Yemen," he added.

ARMY FACTIONS LOYAL TO SALEH

The talks, promised under a Gulf-brokered deal and intended to pave the way for elections in 2014, are expected to cover reforms of the military that would reduce the influence of army factions loyal to Saleh, still seen as a powerful politician.

As about 565 delegates from across the political spectrum were taking their seats at the talks in the capital Sanaa in the north, tens of thousands of defiant demonstrators gathered in the southern city of Aden to demand secession.

Flags of a once independent southern Yemeni country fluttered from cars and buildings across the port city. There were separatist marches in other southern towns including Mukalla, Tarim, al-Shihr and Sayoum, witnesses said.

Hundreds of security forces moved in to the main areas of Aden, positioning themselves outside key buildings such as banks and government offices, the witnesses said.

Nasir al-Nouba, a leader of the secessionist Southern Movement, told reporters: "The conference in Sanaa will fail. Those who are taking part as representatives of the Southern Movement do not represent us. They represent themselves."

"The people of the south will continue their peaceful struggle for independence," he added.

South Yemen emerged as an independent state, separate from North Yemen, when Britain withdrew in 1967 from areas it controlled along the Arabian Peninsula's southern coastline.

Conflict between the political systems of the tribal North and Marxist South led to war in 1979. But when its major patron the Soviet Union fell apart, the South merged in 1990 with the militarily stronger Yemeni Arab Republic based in Sanaa.

HISTORIC MISTAKE

Secessionists failed in a civil war in 1994 to reverse the unification between North and South.

Now some southern secessionist leaders say unity with Sanaa was a historic mistake, leading to appropriation of public land by northerners, dismantling of southern institutions including the army, and dismissal of tens of thousands of administrators.

Most of Yemen's fast-declining oil reserves are in the south, but many southerners say northerners discriminate against them. The central government denies any discrimination.

Western nations suspect that attempts by some southern leaders to break away have the backing of Iran, arch-foe of the Saudis and Americans. Yemeni officials have also accused Iran of backing the Shi'ite Houthi rebels who operate in northern Yemen.

Iran denies any interference in Yemen's affairs.

(Additional reporting by Mohammed Mokhashaf in Aden; Editing by Andrew Heavens)