The Sewol, carrying 476 passengers and crew, capsized on Wednesday on a journey from the port of Incheon to the southern holiday island of Jeju. Thirty-two people are known to have died.
The 69-year-old captain, Lee Joon-seok, was arrested in the early hours of Saturday on charges of negligence along with two other crew members, including the third mate who was steering at the time of the capsize.
Prosecutors later said the mate was steering the Sewol through the waters where it listed and capsized - for the first time in her career.
Asked why the children had been ordered to stay put in their cabins instead of abandoning ship, Lee, apparently overwhelmed by the scale of the disaster, told reporters he feared they would have been swept out to sea in the strong, cold current.
Early reports said that the ferry turned sharply and listed, perhaps due to a shift in the cargo it was carrying and crew members said the captain, who was not initially on the bridge, had tried to right the ship but failed.
Some 500 relatives of the 270 people listed as missing watched a murky underwater video shot after divers reported they had seen three bodies through the windows.
The official number of those missing was revised up from an earlier estimate of 269.
Packed in a gymnasium in the port city of Jindo day and night since Wednesday, tempers frayed and fist fights broke out after the video was shown. The video, viewed by relatives and journalists, did not appear to show any corpses.
"Please lift the ship, so we can get the bodies out," a woman who identified herself as the mother of a child called Kang Hyuck said, using a microphone.
Relatives have criticised what they say is the slow response of the government and contradictory information given out by authorities in the early stages of the rescue mission.
CHANCES OF FINDING SURVIVORS "ALMOST ZERO"
President Park Geun-hye was jeered by some when she visited on Thursday. "Park Geun-hye should come here again," Kang Hyuck's mother said.
Three cranes were moved close to the sunken ship on Saturday but were not deployed. Strong tides and rough weather again impeded efforts to get inside.
Coastguard spokesman Kim Jae-in said the cranes would be deployed when the divers say it is safe.
"Lifting the ship does not mean they will remove it completely from the sea. They can lift it two to three metres off the seabed," he said.
Coastguard officials said that divers would make another attempt to enter the ship in the evening.
"The chances of finding anyone alive now are almost zero," said Bruce Reid, Chief Executive Officer of the International Maritime Rescue Foundation.
"There will still be a search operation on the water, a surface search, but it would be more of a recovery exercise now. They'll be looking for bodies."
The capsize occurred in calm weather on a well-travelled 400 km (300 mile) sea route from Incheon to Jeju some 25 km (15 miles) from land.
Lee, the ship's captain, was described by officials from Chonghaejin Marine Co Ltd, the owner of the vessel, as a "veteran".
"I had ordered (passengers) to leave the ferry, but (later) I said to them to stay because there was no rescue ship," he told South Korean television as he was led away by police.
Police also raided Chonghaejin offices in Incheon and Yang Joong-jin, a prosecutor in the city of Mokpo, said ten people were being questioned over the loading and stowing of the Sewol's cargo.
Yonhap news agency said 180 vehicles were onboard the ferry along with 1,157 tons of freight. At least some of the freight was in containers stacked on the foredeck.
Relatives and friends of the schoolchildren have also gathered at the Danwon High School in the commuter town of Ansan.
The vice-principal of the school, Kang Min-gyu, 52, was one of those rescued as the children followed orders and stayed aboard. He hanged himself outside the gym in Jindo, police said.
His body was discovered on Friday and police released part of a two-page suicide note.
"Burn my body and scatter my ashes at the site of the sunken ferry," he wrote. "Perhaps I can become a teacher for the missing students in my next life."