MACHINE gun-toting rebels guard key government buildings and hotels in this sprawling, hilly capital.Other rebels from the Ethiopian People's Revolutionary Democratic Front (EPRDF), which took over Addis Ababa on May 28, rest atop tanks and armored personnel carriers, park at key intersections, or ride through the streets at night in pickup trucks with artillery mounted in back. Now and then, a shot rings out at night. But during the day on Addis Ababa's back streets, the shops and open-air markets in the captial's massive stick and mud-walled slums are as busy as ever. To get to work, people still jam into blue-and-white mini-van taxis. And beggars, including many ex-soldiers, still swarm around wealthy Ethiopians and foreigners on the streets. Ethiopian officials, civil servants, and other residents have a mixture of praise and fear of the rebels eight weeks after they overthrew dictator Mengistu Haile Mariam's dictatorship. They are pleased by the EPRDF's initial steps toward democracy and with the way they have avoided the bloodshed and retribution many expected. But many who are wary of the EPRDF and some of its deeds have a "wait and see" attitude toward its promises of democracy and human rights. The rebels are still "mentally in battle," says Haile-Wolde Michael, a former official and professor of education at the University of Addis Ababa, of the continuing state of alert and the number of weapons in the city. Public demonstrations are banned, and there is a dusk-to-dawn curfew, although there has been no sign of armed resistance. According to EPRDF acting head of state, Melas Zenawi, there are "80,000 to 90,000 guns floating around in Addis. That's the reason we have restricted the right to demonstrate." Mr. Mengistu armed many of the city's residents, an official says. The EPRDF has called on the public to give up the weapons, "but they're not turning them in." So another house-to-house search for guns is expected by the EPRDF, the official says. SINCE the EPRDF took over, most former government ministers have been detained, but not harmed. Mr. Melas has promised them fair and open trials after independent courts and a commission of inquiry have been set up, which could take some time. Except for shooting suspected thieves, there has been no widespread killing here. Most civil servants, except in the Ministry of Information, have kept their jobs. However, according to one civil servant, only routine work goes on as no one has been named to make decisions. Conscription has ended, and travel restrictions lifted, making it possible for many families separated during the 30-year civil war to be reunited. In their efforts for peace, EPRDF leaders have brought together most of the country's political groups to form a transitional coalition government with the promise of elections within 2 1/2 years. At a five-day conference, which ended July 5, representatives of most of Ethiopia's rebel and ethnic groups agreed to an EPRDF power-sharing plan. Under the plan, the EPRDF got 32 seats in the 87-member Council of Representatives, giving it the largest block in the council. "Peace is the main agenda" in Ethiopia today, says Abdul Mohammed, an Ethiopian who returned from years in exile to participate in the conference. Speaking of EPRDF moves toward peace and freedom, former Megistu official Dr. Haile-Wolde said: "If this continues we are heading toward an open political system for the first time ever." Asked about the human rights record of the new rebel-led government, Haile-Wolde, who is also a professor of education at the University of Addis Ababa, offered a person example: "I'm here."