The states were banned from sending delegates because they held primaries in January, too early under party rules. They made the move in an effort to have greater influence on a nominating process long dominated by Iowa and New Hampshire.
Democrats now want to figure a way to include the two states in the convention because they will be critical in the general election.
But how many delegates should each state get and how should they be distributed between Barack Obama and Hillary Rodham Clinton? That was the vexing question for the committee.
Clinton supporters planned a protest to demand full seating of the 368 delegates from the two states. That outcome was unlikely because committee members are interested in punishing the two states to discourage future line jumpers.
Shortly before the meeting began at a hotel three miles north of the White House, about 500 people had gathered on a sidewalk and cheered loudly as cars turned into the driveway. They waved homemade signs, blew horns and chanted "Every vote!"
Police cordoned off the sidewalk with yellow tape and officers and hotel security kept watch. Tour buses pulled up periodically to drop off protesters.
Sharon Clark of Orlando, Fla., came with a group that had driven from Florida. They wore black T-shirts that said, "This is a Democracy, Be a Democrat." Clark, 41, voted for Obama in the primary. Even though seating the state's delegates probably would help Clinton, she believed Florida's vote should count especially given the state's spotty history on voting.
"I'm tired of it. I want to go and vote and know my vote is going to count," she said.
Beverly Battelle Weeks, 56, a Clinton delegate, got up before 4 a.m. Saturday to drive from Richmond, Va. She carried a black umbrella on which she had pasted letters spelling out "Count All Votes."
"The right thing to do is to seat all the delegates. Anything less is not democratic," she said.
Clinton won both Florida and Michigan after all the candidates agreed not to campaign in either state. At the time, she said the vote did not matter. Now, however, she trails Obama and wants to see her victories result in more delegates at the convention.
"It's important to send the right signals to them and the people living in those states that we Democrats value those states, value those voters and want them as full partners in a general election in assembling 270 electoral votes," said Clinton strategist Harold Ickes, a member of the rules committee.
Obama could afford to allow Clinton a few delegates - going into the meeting, he was just 42 away from the nomination out of more than 2,000 required. Clinton was more than 200 delegates behind.
The committee appeared to be leaning toward a compromise that would allow each state to restore half of its delegate count. That probably would add fewer than 30 more delegates to the total that Obama needs, with three more contests to go - Puerto Rico on Sunday and Montana and South Dakota on Tuesday.
Members of the committee discussed their options over a lengthy dinner with DNC Chairman Howard Dean that began Friday night and lasted until 2 a.m. Saturday. People who attended said no deals were reached, although there was a widespread sentiment that they should try to come up with some resolution that would put the issue behind them.
Obama campaign officials, eager to move on, said they were willing to give Clinton the edge in delegates, but they were not willing to accept the Clinton camp's hard-line stance that all the delegates should be fully seated in accordance to the January elections.
"We have both fought hard throughout the country, both of us, for delegates and the fact that we're willing to essentially cede her delegates we do not think is an insignificant gesture on our part," Obama campaign manager David Plouffe said. "But we're willing to do this in the interest of trying to bring this to a close so we can focus on the general election."