IAGO has a way of stealing "Othello" away from the title character. This doesn't invariably happen, but it's always a possibility - as when Christopher Plummer made a stronger impression than James Earl Jones (not an easy actor to upstage) on Broadway nine years ago.In the New York Shakespeare Festival's current production, Raul Julia makes an uncommonly complex and affecting hero. Yet once again the villain, indelibly played by Christopher Walken, emerges as the most memorable figure. This stems partly from the way Joe Dowling has staged the drama - using a harsh white spotlight, for instance, to isolate Iago during soliloquies and other key scenes - and partly from Mr. Walken's weird but unmistakable brilliance. True, it's not a performance for every taste, and Walken was greeted with some hearty booing (along with plenty of cheers) during at least one curtain call early in the engagement. If you can tune yourself to its unusual wavelength, though, his portrayal has an irresistible fascination and even an offbeat kind of charm. It was as bold and original as anything in producer Joseph Papp's ongoing Shakespeare marathon - since Walken's own astounding "Coriolanus" a few seasons back. Walken's affinity for Iago is rooted in something the actor and the character have in common - not villainy, of course, but the fact that each of them is a performer, and that each uses the technique of injecting a large part of his own personality into whatever role he's playing at the moment. Iago weaves his treacherous web around Othello and Desdemona by posing, pretending, and persuading - in other words, by acting. To bring off his performance, Iago mingles his deceitful fictions with aspects of his own true personality, which lure and ensnare his "audience" with their very authenticity. Walken belongs to the school of contemporary actors who believe in using their own character traits in performances, rather than hiding or suppressing them. While this is an outgrowth of the "Method" acting that reached prominence in the 1950s with such stars as Marlon Brando and Shelley Winters, current performers ranging from Spalding Gray to Peter Riegert and Harry Dean Stanton carry it to extremes, basing their performances on characteristics that they discover ready-made in themselves. This doesn't please audiences who equate "real acting" with stretching and straining for unfamiliar dramatic effects. When a performer with Walken's skill and imagination pulls it off, though, the result can be exhilarating. His gestures and mannerisms in "Othello" have a distinctly contemporary ring, and some of his vocal inflections bring an urban twang to Shakespeare's verse. Yet he executes his maneuvers with such style and vivacity, and fills the stage with such a magnetic presence during even his m ost passive moments, that his experiments are always justified and often positively inspired. Not that Walken is the production's only asset. There is nothing second-best about Mr. Julia's performance, blending wistful love for Desdemona with tragic vulnerability and a sense of turbulent rage burning deep inside; it's a major advance for Julia since his disappointing "Macbeth" earlier in the Shakespeare series. Kathryn Meisle is a winning Desdemona, and Mary Beth Hurt is a stunning Emilia, projecting her own convincing qualities while making an ideal foil for her evil husband. Jake Weber stands o ut as Roderigo, every inch the "gulled gentleman" that Shakespeare specifies. In the end, Walken walks away with this production, accompanied by the able Julia and supported by Frank Conway's scenery and Peter Golub's music. The 18th installment in Mr. Papp's series, "Othello" runs through Sunday in Central Park.