Cleric Abu Bakar Bashir was arrested on Saturday over a spate of church bombings two years ago. The 64-year-old was due to be questioned in relation to the nightclub bombing.
But Bashir had to be taken to hospital with cardiac and breathing problems and is now under police guard, said National Police spokesman General Saleh Saaf.
Indonesian defence minister Matori Abdul Djalil has accused Bashir of
being linked to al-Qaida and said that his right-hand man, known as Hambali, was behind many of the country's terrorist bombings.
Mr Matori stopped short of accusing Bashir of organising the Bali attacks which killed at least 183 people and
injured more than 300. But he said it was logical to believe Bashir knew about them.
The two men are accused of being leaders of Jemaah Islamiyah, believed to be al-Qaida's main ally in south-east Asia.
Hambali is accused of arranging a meeting of two of the September 11 hijackers with other al-Qaida figures in Malaysia in January 2000 and of being behind other plots to blow up Western targets in the region. A team of police doctors was at the hospital yesterday to see if Bashir is healthy enough to travel to Jakarta for questioning.
Bashir's doctor said his patient's health was improving and that he could be released in two or three days. Umar Baradja, Bashir's brother, said police commanders indicated "he could rest in hospital until Thursday".
Police said they were considering confining Bashir to Solo between his home and the hospital under police supervision, or taking him to a police hospital in Jakarta and holding him there.
Bashir denies having any part to play in the atrocity and instead claimed "Americans hired Indonesians" to
carry it out. Hours before he was taken ill Bashir said he was "pained in my heart" when he heard of the terrorist attack on the Sari nightclub.
seven days ago.
But in a chilling warning to Australia he said: "Please advise your government not to follow the US policy
because it will bring tragedy for your country."
Meanwhile police in Bali said the investigation conducted jointly by more than 100 investigators from
Indonesia, Australia, the US, Britain and other countries was proceeding well.
"We are making progress," police spokesman Lieutenant Colonel Yatim Suyatmo said yesterday. He refused to divulge any details.