Nutcracker; Nutcracker, by E. T. A. Hoffmann; translated by Ralph Manheim. Illustrated by Maurice Sendak. New York: Crown Publishers Inc. 120 pp. $19.95.

The ''Nutcracker'' ballet has long been a Christmas tradition. Its December runs have provided enjoyment for scores of dancers, as well as for the families that attend this American favorite annually.

When Kent Stowell, artistic director of the Pacific Northwest Ballet, originally approached Maurice Sendak about designing sets for ''Nutcracker,'' Sendak's initial reaction was to say no. Mr. Sendak didn't ''. . . want to be suited to the confectionery goings-on of this . . . most bland and banal of ballet productions.''

However, Mr. Stowell's intention was not to produce a conventional portrayal of ''Nutcracker.'' He wanted to do a new version, a version based on the original tale by E. T. A. Hoffmann and not on the French adaptation of the tale, ''The Nutcracker of Nuremberg,'' by Alexandre Dumas, pere.

Sendak found that ''the rich, exotic, yet strict lines of neoclassic design and costume perfectly suited . . . (his) vision of Clara and her world.'' He also endeavored to give her the ''wisdom and strength'' with which he tries to endow all the children he draws.

Stowell saw Clara as older than the seven-year-old Marie of the book. She is 12, and ''all . . . curiosity devouring the world with her eyes and imagination. . . .'' So, for Sendak and Stowell, ''the stage became her half-real, half-nightmare battle ground.''

The December 1983 premiere of ''Nutcracker'' in Seattle was a huge success. But when Sendak began to work on the book, he faced a dilemma. There are large portions of the tale that never appear in the stage production. However, rather than adjust the stage designs, Sendak decided to completely illustrate ''The Story of the Hard Nut,'' the tale within a tale in Hoffmann's original. Because of this decision, the book is composed of two separate entities: the original designs and the new illustrations.

At first glance, Maurice Sendak's illustrations for this Christmas classic might disappoint. The stage designs and the new illustrations lack the brilliant colors and fairy-tale presentation normally associated with the ballet; the colors are more subdued and the presentation of Clara (Marie in the book) is more realistic. There is no Sugar Plum fairy, and the battle between the Mouse King and Nutcracker is frightening and fierce.

Sendak's evocative drawings, however, have a beauty and power all their own - due mainly to the muted colors and the realistic presentation Sendak and Stowell were striving for in the ballet.

If you have been to the ''Nutcracker'' or have read another version of the story, you must peruse Sendak's book. It will make you feel that you've never really seen the true ''Nutcracker'' before.

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