WASHINGTON, Oct 25 (Reuters) - President George W. Bush's nominee to be the Pentagon's chief public affairs official told Congress on Tuesday he hoped to encourage more positive stories about the Iraq war by encouraging the practice of embedding reporters with U.S. troops in Iraq.

Dorrance Smith, a former television producer who spent nine months in Iraq as a senior adviser for former ambassador Paul Bremer, also defended his controversial article in the Wall Street Journal in April, in which he said extremists like Osama bin Laden had "a partner in Al-Jazeera, and by extension, most networks in the U.S."

In the article, Smith concluded that the United States was "losing badly" the battle for the hearts and minds of the Iraqi people, and said ethical questions were raised by the practice of U.S. networks airing videos of hostages obtained by Al-Jazeera, a popular Arab-language television channel.

He told the Senate Armed Services Committee one way to get out more positive stories about U.S. troops in Iraq would be to "reinvigorate" the Pentagon's practice of embedding reporters with military units, which was widely used during the invasion of Iraq 2-1/2 years ago but is done only sporadically now.

"We've got to analyze the security situation as it relates to the communications environment to see what we can do to get these stories out in an open and honest way and a timely fashion," Smith said.

Sen. Carl Levin, the ranking Democrat on the committee, grilled Smith repeatedly about the Wall Street Journal article, but Smith said he still believed it was right to question relations between U.S. networks, Al-Jazeera and extremist groups.

"I think that it's fair to say that the terrorists understand that by having film shown on Al-Jazeera it will then be shown on the networks," he said.

But he declined to say the U.S. networks were aiding and abetting terrorism — a question that he had raised in the Journal piece — by airing the videos and failing to report on Qatar's financial support for Al-Jazeera.

Al-Jazeera has often shown video of hostages pleading at gunpoint for their respective governments to withdraw troops. It does not broadcast footage of killings, which are posted on the Internet by militants. Washington has accused the channel of biased reporting on Iraq.

Levin said he remained troubled by Smith's replies, and would oppose his nomination.

Republican Sen. James Inhofe of Oklahoma blasted U.S. media coverage of the war in Iraq, saying that it focused mostly on bad news, and said he hoped Smith could "somehow shame the press" into providing more positive coverage.

Democratic Sen. Ben Nelson of Nebraska bristled at Inhofe's charges, saying, "I think the media has done and continues to do a remarkable job of telling us what we cannot see."