A senior Iraqi official said a high-profile female Iraqi prisoner would soon be released from prison, but U.S. officials denied the claim.
Also Wednesday, NATO allies agreed to coordinate training Iraqi officers outside of Iraq and send 300 instructors to operate a training center in Iraq.
"We are very pleased that this step has now been taken," said NATO spokesman James Appathurai. "This assistance should be oriented to help Iraq build the capability of its government to address the security needs of the Iraqi people."
The announcement came as kidnapping and other incidents of violence continued in the country. Hensley had been taken hostage along with Eugene Armstrong, an American who was killed earlier this week, and British hostage Kenneth Bigley, whom militants have threatened to kill if their demands are not met.
The group Tawhid and Jihad, led by al-Qaida-linked Abu Musab al-Zarqawi, announced Tuesday that they killed Hensley, who would have turned 49 Wednesday. The group also released a video that showed the beheading of Armstrong on Monday.
White House spokesman Scott McClellan said Hensley's death shows "the true barbaric nature of the enemies we face in Iraq." He added, "The terrorists want to shake our will, but they will not."
Al-Zarqawi's group had demanded the release within 48 hours of all Muslim women who are being held at Abu Ghraib prison. The U.S. Embassy in Baghdad said there were no plans to release two women detainees in U.S. custody, despite an earlier statement from Iraq's Justice Department saying Rihab Rashid Taha, a scientist known as Dr. Germ, would be released on bail.
Taha and another woman, Huda Salih Mahdi -- known as "Mrs. Anthrax," are being held at an undisclosed location, according to the U.S. military.
"The judicial system is involved in reviewing the detainees and the condition of the detainees," Iraqi Prime Minister Ayad Allawi told the Associated Press. "We have not been negotiating and we will not negotiate with terrorists on the release of hostages."
Also Wednesday, 10 people were killed and 92 wounded when U.S. aircraft and tanks attacked rebel areas in Baghdad's Sadr City.
The insurgency continued in the capital as two car bombs exploded, killing six people in one and wounding four U.S. soldiers and two Iraqis in another in the upscale district of Mansur.
Two U.S. Army soldiers were killed in northern Iraq on Wednesday. A roadside bomb killed one soldier three miles from Tikrit. The second solder died of wounds suffered during an attack on a patrol in Mosul.