In Parliament last week, Kelly said he could not believe Gilligan's report came from him, but yesterday the BBC journalist said in a statement: "I want to make it clear that I did not misquote or misrepresent Dr David Kelly."
His statement was not universally welcomed. "You rat", screamed the front page of the Sun tabloid. "BBC man sinks to new low by calling dead doc a liar," it added.
Senior judge Lord Hutton was expected to lay out the priorities and timeframe of the inquiry today, but opposition parties were already demanding a much deeper probe into how the Government used intelligence in the run-up to war on Iraq.
"This question is about the integrity of the Government," David Davis of the Conservative Party told BBC radio.
"The difficulty here is the Government is setting the terms and conditions of a judgment on itself."
Blair has ruled out resigning, but political sources still believe the Prime Minister's right-hand man Alastair Campbell and Defence Secretary Geoff Hoon might both become casualties of the crisis.
The conservative Daily Telegraph said 65 per cent of voters in its YouGov poll wanted Campbell to go, while 68 per cent thought Blair's Government had not been trustworthy over the threat posed by Iraq. And 71 per cent said it was wrong for the Government to have named Kelly.
The blame game that raged in the media over the weekend stepped up a gear, with the BBC accused by some of bending its own standards to dubiously squeeze a sensational story out of its contact with Kelly.
The main claim against the BBC is that Gilligan's report - sensationally accusing officials of hyping up intelligence Saddam Hussein could deploy weapons in 45 minutes - did not reflect his contact with Kelly.
Many newspapers examined in detail how Kelly's name had come to be leaked by the Ministry of Defence to the press.
The harshest criticism, however was reserved for the BBC.
"I think that heads should roll at the BBC," Robert Jackson, the legislator for Kelly's local Oxfordshire area said. "I believe the BBC are responsible for his death."
Tom Mangold, a journalist friend of Kelly, said all parties owed it to Kelly's memory to give full disclosure. "What you can't do is leave this thing hanging in limbo," he said.
"And you can't let Dave Kelly go to the grave with that big smear on his reputation."
Blair said he will give evidence to the inquiry into Kelly's death.
"Of course there are things that I will talk about to the inquiry, as will others."
Blair's surprise statement came as he was challenged to rein back Labour backbenchers attacking the BBC.
Blair described Kelly's death as "a terrible, terrible tragedy".
He went on: "I think people want and expect ourselves as politicians and yourselves as the media to show that respect and restraint."
- REUTERS
British Parliament Foreign Affairs Committee transcript:
Evidence of Dr David Kelly
Key players in the 'sexed-up dossier' affair
Herald Feature: Iraq
Iraq links and resources