Isaac poured unrelenting rain Thursday, flooding areas north and south of New Orleans even as the city's fortified defences held and forcing officials to launch speedy evacuation and rescue efforts as it marched slowly across the state.

By the late afternoon, the storm lost much of its punch and was downgraded to a tropical depression.

It did however leave hundreds of homes underwater, stranded thousands of people and left half of Louisiana without power. About 500 people had to be rescued by boat or high-water vehicles, and at least two people were killed by Thursday.

Along the shores of Lake Ponchartrain, near New Orleans, officials sent scores of buses and dozens of high-water vehicles to help evacuate about 3,000 people as rising waters lapped against houses and left cars stranded. Floodwaters rose waist-high in some neighbourhoods, and the Louisiana National Guard was working with sheriff's deputies to rescue people stranded in their homes.

Late afternoon Thursday, crews were breaching a levee stressed by Isaac's floodwaters in southeast Louisiana's hard-hit Plaquemines Parish. At the same time, water at a dam farther north in Mississippi was released in an effort to prevent flooding there. 

Officials hope the breach in Plaquemines Parish will relieve pressure on the levee. The sparsely populated area  is outside the federal levee system and has been plagued by flooding since Isaac sloshed ashore as a hurricane Tuesday evening and pushed water over an 18-mile levee.  Up to 60,000 people had been ordered to evacuate the area and nearly 150 had to be rescued from flooding.

Even as Isaac weakened on its slow trek inland, it continued to spin off life-threatening weather including storm surges, inland flooding from torrential rain and potential tornadoes. Nearly half of Louisiana electrical customers lost power and another 150,000 were out in neighbouring Mississippi.

A Coast Guard helicopter hoisted a couple and their dogs early Thursday from a home in LaPlace, between the Mississippi River and Lake Ponchartrain, after storm surge poured into their neighbourhood and local authorities called for help. The couple was taken to New Orleans and reported in good condition.

"The husband and wife and their two dogs were in an area where a lot of houses washed away," said Lt. Cmdr. Jorge Porto. "They used a flashlight inside the house as a signalling device, which made all the difference in locating them effectively."

The floodwaters "were shockingly fast-rising, from what I understand from talking to people," Lt. Gov. Jay Dardenne said. "It caught everybody by surprise."

President Barack Obama declared federal emergencies in Louisiana and Mississippi late Wednesday, allowing federal aid to be freed up for affected areas.

Isaac arrived seven years after Hurricane Katrina and passed slightly to the west of New Orleans, where the city's fortified levee system easily handled the assault.

"Unfortunately, that's not been the case for low-lying areas outside the federal system, in particular lower Jefferson and Plaquemines parishes," said Louisiana Democratic US. Sen. Mary Landrieu. "Hurricane Isaac has reinforced for us once again just how vulnerable these critical areas are. We must re-engage the Corps of Engineers on this."

Jerry Larpenter, sheriff in nearby Terrebonne Parish, said he thinks the storm's impact took many by surprise.

"I think a lot of people were caught with their pants down," he said. "This storm was never predicted right since it entered the Gulf. It was supposed to go to Florida, Panama City, Biloxi, New Orleans. We hope it loses its punch once it comes in all the way."

Louisiana's Public Service Commission said 901,000 homes and businesses around the state — about 47 per cent of all customers — were without power Thursday. Utility company Entergy said that included about 157,000 in New Orleans.

New Orleans' biggest problems seemed to be downed power lines, scattered tree limbs and minor flooding. One person was reported killed, compared with 1,800 deaths from Katrina in Louisiana and Mississippi. And police reported few problems with looting. New Orleans Mayor Mitch Landrieu ordered a dusk-to-dawn curfew.

Jefferson Parish Council president Chris Roberts said forecasters at the National Hurricane Center needed a new way of measuring the danger. Many second-guessed evacuation orders in his New Orleans neighbourhood.

"The risk that a public official has is, people say, `Aw, it's a Category 1 storm and you guys are out there calling for mandatory evacuations,"' Roberts said.

Hundreds of people in lower Jefferson chose to ride out the storm and many of them had to be rescued, he said.

Eric Blake, a hurricane specialist at the National Hurricane Center in Miami, said although Isaac's cone shifted west as it zigzagged toward the Gulf Coast, forecasters accurately predicted its path, intensity and rainfall. He did say the storm crept ashore somewhat slower than anticipated.

Blake also said local officials and residents shouldn't use Katrina as a guide for what areas were at the greatest risk of flooding during Isaac.

"Every hurricane is different," Blake said. "If you're trying to use the last hurricane to gauge your storm surge risk, it's very dangerous."

Plaquemines Parish flooded

But in Plaquemines Parish, the storm pushed water over an 30-kilometre levee and put so much pressure on it that authorities planned to intentionally puncture the floodwall to relieve the strain.

Officials rushed to evacuate more than 100 nursing home residents from Plaquemines Parish, an area with a reputation for weathering storms and perhaps the hardest hit by Isaac. In this hardscrabble, mostly rural parish, even the sick and elderly are hardened storm veterans.

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Marci Brunies carries her dog Chipper as they evacuate their neighbourhood in Slidell, Louisiana. (Michael Spooneybarger/Reuters)

"I don't think we had to evacuate to begin with," said Romaine Dahl, 59, as he sat in a wheelchair. "The weather was a hell of a lot worse last night than it is now. And I got an idea that after all this is said and done they're going to say everything is over with, go on back home.".

Downgraded to tropical storm

By midafternoon Wednesday, Isaac had been downgraded to a tropical storm. The Louisiana National Guard ceased rescue operations in Plaquemines Parish, saying it felt confident it had gotten everyone out. There were no serious injuries. National Guard spokesman Capt. Lance Cagnolatti said guardsmen would stay in the area over the coming days to help.

By early Thursday, Isaac's maximum sustained winds had decreased to 72 km/h and the National Hurricane Center said it was expected to become a tropical depression by Thursday night, meaning its top sustained winds would drop below 63 km/h. The storm's center was on track to cross Arkansas on Friday and southern Missouri on Friday night, spreading rain as it goes.

Forecasters expected Isaac to move farther inland over the next several days, dumping rain on drought-stricken states across the nation's midsection before finally breaking up over the weekend.

Even at its strongest, the storm was far weaker than Hurricane Katrina, which crippled New Orleans in 2005. Because Isaac's coiled bands of rain and wind were moving at only 8 km/h — about the pace of a brisk walk — the threat of storm surges and flooding was expected to linger Thursday as the immense comma-shaped system crawled across Louisiana.

The storm knocked out power, stripped branches off trees and flattened fields of sugar cane so completely that they looked as if a tank had driven over them.

In coastal Mississippi, officials used small motorboats Wednesday to rescue at least two dozen people from a neighbourhood Isaac flooded in Pearlington. In addition, the National Weather Service said there were reports of at least three possible tornadoes touching down in coastal counties. No injuries were reported.

Katrina ceremonies cancelled

Back in New Orleans, the storm cancelled remembrance ceremonies for those killed by Katrina. Since that catastrophe, the city's levee system has been bolstered by $14 billion US in federal repairs and improvements. The bigger, stronger levees were tested for the first time by Hurricane Gustav in 2008.

Isaac came ashore late Tuesday as a Category 1 hurricane, with 129 km/h winds near the mouth of the Mississippi River. It drove a wall of water more than three metres high inland.

In Vermilion Parish, a 36-year-old man died after falling almost 5.5 metres from a tree while helping friends move a vehicle ahead of the storm. Deputies did not know why he climbed the tree.

The storm stalled for several hours before resuming a slow trek inland, and forecasters said that was in keeping with its erratic history. The slow motion over land means Isaac could be a major soaker, dumping up to 500 millimetres of rain in some areas. New Orleans reported at about 250 millimetres in some places as rain continued to fall late Wednesday.

As hard wind and heavy rain pelted Melba Leggett-Barnes' home in the Lower 9th Ward, an area leveled during Katrina, she felt more secure than she did seven years ago.

"I have a hurricane house this time," said Barnes, who has been living in her newly rebuilt home since 2008. She and her husband, Baxter Barnes, were among the first to get a home through Brad Pitt's Make It Right program.

Her yellow house with a large porch and iron trellis was taking a beating but holding strong.

"I don't have power, but I'm all right," said Barnes, a cafeteria worker for the New Orleans school system.