By Mike Wooldridge BBC world affairs correspondent

One week on, we still do not know exactly how many people were killed in the car bombing on the Indonesian resort island of Bali.

The bombsite in Kuta has become a place of pilgrimage

But it was the worst act of terrorism since the 11 September attacks, and now the government of the world's most populous Muslim nation has armed itself with new powers to tackle terrorism.

Many people who live in the Island of the Gods - as Bali is known - simply cannot believe that anything of such a nature could have happened there.

The tropical paradise where more than 180 people, mostly Australians, died has - in the words of the local paper - "lost its innocence".

Narrow escapes

I have lost count of the number of people who have told me this week that they, or a close friend, had a narrow escape.

Many people - Balinese and tourists - say they survived through luck

There was the Balinese girl who told me her friend did not like the music playing that night at the Sari Club - which took the full force of the car bomb - so she left earlier than she intended.

A taxi driver told me he had had a really good fare in the middle of that evening so he decided not to work on, as usual, until midnight. Had he done so, he said he almost certainly would have been waiting to pick up passengers outside the Sari Club as the bomb went off.

And, among the most extraordinary of all, there was the British couple who had come to Bali to get married and were in the club when the bomb exploded - at a table at the back so they just had time to make an escape up a staircase before the club was totally destroyed.

Shattered peace

And so the stories have gone on of the hand that fate dealt that night, for good and for ill, in an island that never suspected it would become a new front in the war on terror.

"In Australia's playground home, peace has been shattered" - the words of an Australian chaplain at the sunset memorial service for victims and their families held outside the Australian consulate during the visit of the Prime Minister, John Howard.

Bali has not just been a favourite haunt of Australians, of course, but of travellers from many nations and of all ages.

Photos of victims adorn a cross at Australia's consulate in Bali

At the end of the service, as haunting music played over the loudspeakers and night descended, Michael Baldacino knelt before a six-foot (two-metre) high, plain wooden cross and placed his mother Sylvia's photograph at the base.

Pictures of other victims of the bombing had been fixed on the downward spar.

He and other relatives of the victims comforted one another. And they sat and stared into the glow of flickering candles.

Sylvia would have been 56 this coming week. Michael said she loved to dance at the Sari Club. She is one of the many victims forensic experts have not, as yet, been able to identify.

Bali's Ground Zero

The scene of the bombing has become something of a place of pilgrimage. A huge hole has been torn out of the heart of Kuta Beach.

I was sure, in Bali, people would not do anything like this - I am very sad, I am very confused

Balinese man in Kuta

At the police barriers, people come just to stand and take in the enormity of the devastation. The road leading to the Sari Club has become a tunnel of wreaths and tropical flowers left by well-wishers.

I watched one group of Balinese men and women place their wreath against the wall and then kneel on the pavement and pray together, hands folded above their heads.

One of them told me: "I was sure, in Bali, people would not do anything like this. I am very sad. I am very confused."

Foreigners here say they have had Balinese strangers apologising to them, even though this community now bears the scars of the bombing as deeply as any other.

'Terrorists no, tourists yes'

Long strips of white cloth have been hung down each side of the road, for people to write messages.

"Terrorists no, no, no. Tourists yes". That one captures Bali's fear - that tourism, with so many livelihoods dependent on it, will collapse.

The spirit of the Sari Club lives on in another message I saw: "Madonna says violence gets violence. Just stop it."

Everywhere now in this area there is the sound of shards of glass being stripped out of windows, of bomb damaged roofs and walls starting to be repaired.

Racmaat Adi had more clearing and rebuilding to do than most at his grocery store but he was trying to get back into business as quickly as possible.

He thought it would help to give tourists confidence that Bali could be safe for them again.

They were crazy, uncivilised people who did this, he said.

Vulnerable democracy

Through presidential decree, Indonesia has now introduced new anti-terror measures that give the police extra powers to deal with those suspected of involvement in terrorism.

Indonesian democracy is still vulnerable after the years of authoritarian rule and the government has had two worries - about appearing to reverse hard-won civil liberties, and about a potential backlash.

New security laws have been introduced as Bali tries to understand the tragedy

But after the Bali bomb - and facing international criticism that it is allowing Indonesia to become a hotbed of terrorism - the government has crossed a threshold in joining the war on terror.

The question now is how the new powers will be used.

Here in Bali, as the week drew to its close, they drew on the island's predominantly Hindu culture to symbolically cleanse the site of the tragedy - to ward off the evil spirits many feel have descended on the place.

Against a background of plaintive chanting, hundreds of people gathered at the site for a purification ritual which, they hope, will free them from fear and bring the good spirits - and the good times - back to Bali.