Update: (10:06 a.m.) Though Reuters and some French TV outlets were reporting that Mohammed Merah has been arrested, there are conflicting reports out there. A police source told Le Figaro that negotiations are still under way, while the French Interior Minister has also denied the arrest.
Update (9:57 a.m.) The Guardian is reporting that French President Nicolas Sarkozy has arrived on the scene--they note that many expect Sarkozy to announce the arrest himself. They add: "The election is just weeks away."
Update (9:25 a.m.): Reuters is reporting that Mohammed Merah has turned himself in. Merah is the prime suspect in the shootings last week which claimed the lives of three French soldiers and shooting four people (three children) at a Jewish school on Monday. According to The Guardian, the standoff is more than 12 hours old.
UPDATE (7:00 a.m.): Reuters is now reporting that a prison director in Kandahar, Afghanistan, says Merah was arrested and sentenced to three years in prison for planting bombs in Kandahar, but escaped during a mass jailbreak orchestrated by the Taliban. Kandahar's government office says it's not the same guy.
UPDATE (6:00 a.m.): French police say that negotiations have stopped, but people living in the neighborhood have been evacuated and the gas has been turned off to the suspects building, under fears he might to try to blow it up. The suspect's car has also been searched and more weapons found there.