* Government to go ahead with Sunday election
* Election Commission had urged delay, warning of chaos
* Two hurt in shooting at protest (Updates with warning of long delay for parliament)
By Amy Sawitta Lefevre and Pracha Hariraksapitak
BANGKOK, Jan 28 (Reuters) - Thailand's embattled government is pushing ahead with a general election on Sunday despite warnings it could end in violence and the country left without a functioning administration for six months.
The decision to go ahead with the polls came at a meeting between Prime Minister Yingluck Shinawatra and Election Commission officials and cast further doubt over any quick resolution to months of protests aimed at ousting the government.
The demonstrations are the latest eruption in a political conflict that has gripped Thailand for eight years, broadly pitting Bangkok's middle class and royalist establishment against the mainly poor, rural supporters of Yingluck and her brother, ousted former premier Thaksin Shinawatra.
The protesters reject the election that Yingluck's party will almost certainly win.
They want to suspend what they say is a fragile democracy commandeered by former telecoms tycoon Thaksin, whom they accuse of corruption, and eradicate the political influence of his family by altering electoral arrangements.
As part of their campaign, the protesters have been disrupting election preparations and early voting. In some constituencies, candidates have been unable to register and there might not be a quorum to open parliament and choose a government.
"The election result might not yield enough seats. It might take four to six months to convene parliament," said Somchai Srisutthiyakorn, an Election Commission official.
The Election Commission said it would hold by-elections until all parliamentary seats are filled. That could take up to six months and leave Thailand with a government that cannot pass laws or a budget.
In particular, it means Yingluck will struggle to find the funds to pay a mounting bill for a costly rice buying scheme which won her party huge support in the rural north and northeast of Thailand, which is her political power base.
Yingluck has been heading a caretaker government with very limited powers since dissolving parliament in December to call the election in the hope of defusing the protests.
FEARS OF CLASHES
Underscoring the risk of violence, while the meeting between the prime minister and election officials was going on at an Army Club complex, two people were hurt in a shooting where about 500 anti-government protesters had gathered in the same complex but some distance away.
At the weekend, one anti-government protest leader was shot dead and 10 people were hurt when clashes broke out as protesters prevented early voting in much of the capital.
The Election Commission has argued that the country is too unsettled to hold an election now.
"We fear that there will be clashes on election day," said election official Somchai.
The government declared a state of emergency last week and has issued an ultimatum to protest leaders that they face arrest by Thursday if they do not give up areas of Bangkok they have taken over.
However, a Bangkok criminal court rejected the government's request for an arrest warrant for 16 protest leaders, including leader Suthep Thaugsuban.
Suthep has threatened to shut down the agency in charge of the emergency decree by Wednesday morning.
There are widespread fears that violence could escalate in the increasingly divisive dispute and that the army might step in. It has staged or attempted 18 coups in 80 years of on-off democracy but has tried to remain neutral this time.
Yingluck is Thailand's fifth prime minister since the populist Thaksin was toppled by the army in 2006 and went into exile two years later to escape a jail sentence that was handed down for abuse of power. (Editing by Jonathan Thatcher, Alan Raybould and Robert Birsel)
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