Gregoire, the loser by increasingly slim margins in the first two counts, could claim an even wider margin of victory thanks to a state Supreme Court decision Wednesday that allows more than 700 belatedly discovered King County ballots to be counted.

At a news conference in Seattle, Gregoire said she wouldn't declare victory yet.

"Keep the faith," she told cheering supporters. "The election process is working exactly as it should."

King County, a Democratic stronghold and the last county to finish counting ballots, is expected to certify its results Thursday, but it appeared the courts ultimately will have to decide who won.

Republicans have begun preparing for a lawsuit, and vowed to seek out Rossi voters whose ballots were disqualified because of election workers' errors and ask canvassing boards to review them.

"It's certainly too close to call and Dino is not conceding," Rossi spokeswoman Mary Lane said. "This election is not over."

The ruling and the recount results were explosive twists in the roller-coaster race, which was supposed to have been settled Nov. 2.

Gregoire, 57, a three-term attorney general, was the favorite going into the election against Rossi, 45, a real estate agent and former state senator.

But out of 2.9 million ballots cast on Election Day, Rossi won by 261 votes over Gregoire. His lead was whittled to 42 votes in a subsequent machine recount. Democrats paid $730,000 for the hand recount, though by law the state has to repay the party if the recount reverses the results.

Asked whether Rossi should concede, Gregoire said she'd leave that decision up to him.

"I've been called on many times to concede," she said with a smile. But she urged Rossi to abide by the final result of the hand recount.

"We've got huge issues facing the state, and we need to get on with it," she said. "Whoever is governor is going to have a challenge of bringing the state together."

King County's hand recount results were announced after the state's high court unanimously ruled that 723 overlooked ballots also should be included in the tally. All valid ballots among those were expected to be counted by Thursday.

During the hand recount, workers in King County found 573 ballots that elections officials say were mistakenly rejected because of a problem with how the voters' signatures had been scanned into the computer system. Workers then searched a warehouse and found 150 more overlooked ballots from voters with last names beginning with A, B and C.

Elections officials believe there also may be 12 additional ballots to be counted. While they have 723 in hand, computer records show there were 735 cast.

State GOP Chairman Chris Vance called their discovery weeks after the election "very suspicious." And some Washington state residents who had calmly been watching the recount with confidence in their state's reputation for clean politics were starting to have their doubts.

At a hearing Wednesday morning before the Supreme Court, Republicans had argued that a recount should be a mere retabulation, and that it was too late for counties to go back and correct errors.

But the court unanimously said state law and previous court rulings specifically allow county canvassing boards to correct mistakes during a recount.

Justices questioned Republican claims that counting the votes would cause irreparable harm.

"You're looking at it from the point of view of the winner or the loser - shouldn't we be looking at it from the point of view of the voter?" asked Justice Susan Owens.

After the Secretary of State certifies the election, which is expected Thursday, any registered voter can sue to challenge the results. Republicans have already begun preparing for possible legal action, and Rossi has repeatedly said he'll keep all his options open.

If the legal fighting does not produce a new governor by the scheduled Jan. 12 inauguration, lame-duck Gov. Gary Locke, a Democrat, may have to stick around. That is because of a provision of the state constitution that says the governor's term of office is four years "and until his successor is elected and qualified."

Locke has made it clear he is not interested in hanging around.