The two Palestinians in an Amman living room were deep in a heated argument. ''You know how we are suffering under occupation,'' one visitor from the Israeli-occupied West Bank cried anxiously. ''If the PLO doesn't move quickly, Israel will have swallowed all our land.''
''We suffered too,'' retorted the second Palestinian, who had recently arrived in the Jordanian capital after being evacuated with the Palestine Liberation Organization from Beirut. ''We shed too much blood just to surrender the revolution to the Americans. We have to worry about the refugees back in Lebanon, about rebuilding the organization.''
On February 14, the 530-member Palestine National Council (PNC), the PLO's de facto parliament, will meet to chart a future course for the organization. Debate within the PLO and among Palestinians all over the Middle East is fierce. The PLO leadership, headed by Yasser Arafat, faces perhaps the most bitter choices in the organization's 18-year history.
Since Israel's invasion of Lebanon last summer drove the PLO from its Lebanese ''state within a state,'' its organization and fighters have been scattered, their base in the Arab heartland lost, and their conventional military option destroyed.
Should they now forcefully pursue the political option? They must decide on the form of negotiations for a homeland on a part of former Palestine. There is no guarantee of success, and such a move could precipitate the disintegration of the current PLO organization.
Or should they focus on preserving and rebuilding the PLO for some as yet undefined form of future struggle, and perhaps lose forever their dwindling chance to negotiate back a part of former Palestine?
The PLO is under pressure from many Palestinians on the West Bank who fear their land may soon be irrevocably lost and condemned to permanent occupation as Israel presses ahead with massive Jewish settlement.
''Without saving the land there will be no Palestinian problem to discuss, no more solutions to debate,'' says prominent West Bank businessman Hikmat al-Masri.
''I wouldn't want to be in Arafat's shoes. It must be agony,'' said a diplomat in Amman.
Added a Jordanian official, ''The PLO is being asked to choose between giving up their organization or giving up their land.''
The decision is all the more painful since the only current negotiating option which shows any prospect of getting off the ground - President Reagan's Mideast peace proposals - is not at all palatable to the PLO. Under the Reagan plan, Jordan's King Hussein would act as negotiator for the return to Arab sovereignty of the Israeli-occupied West Bank and Gaza Strip in a delegation which would include non-PLO Palestinians from those areas. The PLO would give a ''green light'' for this delegation, a necessity since the PLO is the Arab League-designated official spokesman for all Palestinians.
The West Bank and Gaza Strip are the only parts of pre-1948 Palestine where the Palestinians still stand a faint chance of establishing a homeland. But the Reagan proposals - and the Jordanians - both rule out the PLO's longstanding goal of an independent state.
They favor a Jordanian-Palestinian federation linking the east bank of Jordan , currently under King Hussein's rule, with the bulk of West Bank-Gaza land which they want Israel to return.
Moreover, the Reagan plan does not mention the PLO. As currently envisioned by the United States, the PLO would have no public role in the negotiations. While Jordan wants the PLO to publicly endorse non-PLO Palestinian delegates, so as to bind it to the peace process and give King Hussein more credibility, the US so far has vetoed this idea because it is sure Israel would object.
The alternative for the PLO is equally bitter: to try to regroup its fighters and leaders scattered among eight Arab countries, each of which will inevitably try to control them.
Forced from their Beirut base by Israel, the dispersed PLO fighters are growing increasingly restless. One young Palestinian, who escaped from a Syrian camp for PLO fighters, located outside Damascus, said, ''They keep us like prisoners under 24-hour guard.'' He emulates comrades who had fled from the Oued Zarga Camp in Tunisia.
Looking anxiously outside the window of his hotel room in Damascus, he added, ''The Syrian security police have rounded up 300 who escaped and taken them back. All the men are trying to get false passports so they can get out of here.''
He added bitterly, ''But at least it's better than our Marxist brothers in South Yemen who keep the fighters 600 miles from Aden in a camp accessible only by air.''
It is not even clear yet where the PLO will find a base of operations. ''Our headquarters has become an airplane,'' said one PLO man, a reference to constant flights between Mr. Arafat's current but distant base in Tunis and the capitals of the Arab world.
In Syria, which is home to nominal PLO headquarters and several hard-line PLO groups, the government has indicated its displeasure with the moderate Fatah wing led by PLO chairman Arafat. Syrian radio and television have attacked Arafat by name.
Syrian President Hafez Assad, who opposes Arafat's turn toward Jordan or the Reagan plan, has not met with the PLO leader during the latter's several visits to Damascus since the PLO's exodus from Beirut.
At the first such visit last September, there was no welcoming committee at Damascus airport, only one station wagon. Inside was Brig. Saad Sayel, known as Abul Walid, the PLO's most senior military officer, equivalent to chief of staff.
''This is the way things are now,'' he said with a small smile in answer to a question about the lack of reception.
Ten days later Abul Walid was assasinated as he visited Palestinian positions in Lebanon's Bekaa Valley, where the bulk of remaining PLO fighters stay in Syrian-controlled territory. While the killers were not found, many Fatah members are convinced the Syrians were involved.
These pressures have forced Mr. Arafat into ever more serious dialogue with his former arch-enemy King Hussein, whose Army drove PLO fighters out of Jordan in 1970-71. This dialogue, ongoing in one form or another since 1979, is vital even if only as a counterweight to PLO dependence on Syria and as a link to the West Bank.
However, since the Beirut exodus, several top Fatah leaders, including Khalil Wizir (Abu Jihad), the PLO's top military planner, and key Arafat aide Hani Hassan, have moved to Amman where they obviously feel safer than in Syria, and closer to the action than in Tunisia.
Jordan has ruled out the return of PLO fighters to its soil except for up to 5,000 fighters - men with Jordanian passports and clean security records - whom King Hussein is willing to allow back to serve in special units under command of the Jordanian Army.
But in a clear sign of the times, there has been talk within PLO circles of moving all PLO political offices to Amman, an idea so far vetoed by the Jordanians. Any such action will clearly hinge on PLO backing of King Hussein's diplomatic moves.
The PLO may be rescued from its choice if the Reagan plan stalls. King Hussein will only announce his readiness to negotiate once the US has demonstrated credibility in Lebanon by negotiating a timetable for Israeli troop withdrawals. He will only sit down to negotiate if the US convinces Israel to freeze Jewish settlement on the West Bank and Gaza. So far no progress has been made on either count, and Israel, which opposes the Reagan plan, sees no reason to ease its path.
But should the US satisfy the King, and the PLO give him a ''green light,'' the PLO would be left sitting on the sidelines while negotiations proceeded. With talks at best bound to be protracted and painful, this holds out grim prospects for the PLO's future.
''If these talks drag out for years like Israel's negotiations with Egypt, and then fail, what will happen to the PLO?'' asked one PLO official in Amman pointedly. ''How could we rebuild a revolution after being out of things for four years?''
Moreover, while the PLO wants the US to guarantee the return of West Bank-Gaza land, the US is offering no guarantees beyond a promise to Jordan to support return of the land for peace. Israel is committed to keeping the West Bank and Gaza.
The PLO could deal itself partially into the process by unilaterally recognizing Israel, a precondition laid down by the US before it will talk directly to the PLO. The PLO wants more for playing this ''last card,'' namely a direct role in negotiations. The US has vetoed this, knowing Israel will refuse. Israeli Foreign Minister Yitzhak Shamir reiterated this week that Israel will not talk to the PLO even if it recognizes Israel.
In fact, say informed Jordanian sources, the Americans are not eager to have the PLO recognize Israel because it would only complicate the negotiating process. ''The US is treating the PLO very harshly,'' says one knowledgeable Jordanian. ''They are militarily finished, and now they are being asked to admit they are politically finished.''
(Ironically, Western sources point out, the US backed PLO participation in negotiations with it, Egypt, and Israel in December 1977 at the Mena House talks outside Cairo following President Anwar Sadat's visit to Jerusalem. But the PLO never showed up - and if it had, Israel would have walked out).
At any rate, the PLO is deeply suspicious of the credibility of the US, which gave guarantees that Palestinian refugees in Beirut would not be harmed once the PLO evacuated the Lebanese capital. ''We are told our only option is to put our hands in those of the Americans even after (the massacre at) Sabra and Shatila, '' says Hanna Nasir, PLO executive committee member. ''This is like saying 'you are on top of a burning building and your only choice is to jump.' ''
Those PLO members who oppose negotiations argue that in the long run historic conditions will again favor the Palestinian cause.
''The game is not over,'' insisted one Fatah member who had spent 15 years in an Israeli prison. ''We are sure the current Arab regimes which betrayed us will fall and the big powers won't remain forever. And Israel will overextend herself trying to rule the whole Middle East.'' Many Palestinians believe PLO splinters will return to international terrorism, whether or not the mainstream PLO approves negotiations.
''Anyone who thinks we can get more by waiting is dreaming,'' retorts West Bank businessman Hikmat al-Masri.
The mainstream PLO leadership is trying to hammer out a common strategy among the eight commando groups before the PNC meets in Algiers. But tensions are running high between supporters and opponents of ''the Jordan option'' and negotiations based on the Reagan plan.
Informed Palestinian sources expect the PNC will head off a split by avoiding any dramatic decisions in favor of authorizing Arafat and the PLO executive committee to continue to explore all options. They say certain guidelines will be set out, stressing the exclusivity of the PLO as representative of the Palestinians and the necessity for an independent Palestinian state, as called for by the Fez peace plan put forward by the Arab states last year.
They say Arafat, a master at diplomatic maneuvering, will wait until the outlines of what the PLO is being offered become clearer. The PLO chief has strengthened his hand with the addition of 40 new members to the PNC, and his support remains strong both in the occupied territories and the Palestinian diaspora.
However, some PLO moderates, like the PLO's representative in Beirut, Shafik al-Hout, believe a historic decision will soon have to be made, either positively or negatively. He predicts the PNC could split into majority and minority factions.