Rebels seized the strategic port city on Monday, tightening the noose around Taylor, a former warlord who is battling with another rebel faction for control of the capital Monrovia.
"There are bodies all over the place. Dozens of people have been killed," said one resident by telephone, who did not want to give his name. "The wounded are on the streets and there is no way to treat them."
The reports revealed a city sinking into the kind of horror that has gripped Monrovia, where see-saw battles around key bridges have raged for 12 days with hundreds of thousands of civilians caught in the crossfire.
Another resident said the dead in Buchanan were being carted away in wheelbarrows when it was safe to retrieve them.
West African pledges to send in peacekeepers have been hobbled by haggling over who should pay and concerns about the fighting on the ground. A long-awaited reconnaissance mission was due to head to Liberia yesterday. About 1,500 Nigerian soldiers are on standby to enter Monrovia's streets, but regional leaders want a truce first.
UN Secretary-General Kofi Annan on Tuesday asked the Security Council to approve the immediate deployment of the troops, saying he was deeply concerned. Rebels promised another ceasefire on Tuesday, but like four other truces declared recently, it never took hold. The government swiftly rejected it and the fighting never paused. In Monrovia, the sound of gunfire ripped through the dawn air yesterday near the heavily contested Stockton Creek bridge on the road that bypasses the centre toward Taylor's residence and the international airport. Sporadic shots rang out elsewhere and mortar fire killed one person in the West Point shanty district.
Taylor's forces failed to recapture all of Buchanan on Tuesday in a heavy counter-attack against rebels of the Movement for Democracy in Liberia (Model), Liberia's smaller rebel group.
The rebels were hunting for officials of Taylor's National Patriotic Party.
The United States has come under increasing pressure to intervene in a country founded by freed American slaves.
US Assistant Secretary of State Walter Kansteiner was due in West Africa yesterday to request that all of Liberia's neighbours crack down on arms supplies to the rebels.