AS a frail and exhausted Jack Mann landed back in England after 865 days in captivity, a senior British government source expressed "steady hope" that all remaining Western hostages would be released "by Christmas or perhaps a short while thereafter."Mr. Mann's appearance was testimony to the treatment this 77-year-old Englishman had received at the hands of his kidnappers. For more than two years he has not been allowed to speak, and he has been "regularly tortured," he said. All those involved in the hostage negotiations - the Iranians, the United Nations diplomats, and the Western governments - are hoping that Mann's release is the first step in a comprehensive package that will result in the release of the nine remaining Western hostages in Beirut. The new element in the exchange process is that this time, the kidnappers themselves are expressing the hope that the hostage file can be closed. Just hours before Mann was released, the Revolutionary Justice Organization, which also holds American Joseph Cicippio, announced that it wanted a speedy solution to the hostage issue. Such statements reflect the pressure the movement finds itself under from Iran. The Revolutionary Justice Organization is widely believed to be another fictitious name for one of the many factions in the pro-Iranian Hizbullah movement, or Party of God, in Lebanon. The key to the new environment is the slow but sure strengthening of the Iranian president, Hashemi Rafsanjani, and his moderate reformist views in Tehran. Hard-liners, led by former Interior Minister Ali Akbar Mohtashemi, once Iran's ambassador to Damascus and sponsor of Lebanon's Hizbullah movement, are losing ground rapidly. Next year, elections in Iran are expected to confirm the moderates' popularity and their policies of improving ties with the West. The declining Iranian commitment has left the Hizbullah movement painfully exposed to the realities of Lebanese internal politics. The reality is that the Hizbullah has to live with 40,000 Syrian troops whose word is law. Another reality is that Syria is determined to go to the Middle East peace conference. There are already symptoms of Hizbullah's uneasy relations with the Syrians. The Hizbullah has been obliged to withdraw its gunmen from Beirut. The barracks in the southern suburbs where once hostages were thought to be kept have been stormed by the Lebanese Army. Three months ago, the Syrians cleared out Iranian Revolutionary Guards from the Sheikh Abdullah barracks in Baalbek, the Hizbullah home base in eastern Lebanon. Former hostages had been imprisoned in the Abdullah barracks. TODAY, the Revolutionary Guard, whose presence reinforced its Hizbullah supporters, has been moved to a remote hillside near the Syrian border. Their numbers have dwindled from several thousand to a mere 200 to 300, say informed sources in Baalbek. Relations between Syria and Iran will hinge on the outcome of the Middle East peace conference. As one Lebanese commentator put it: "If the peace conference fails, the Hizbullah will become strong again, it will give it a reason to exist." Among the Lebanese, Hizbullah is already loosing ground. Liberal-minded Lebanese merchants and traders are eager to rebuild their country, and for this foreign aid is necessity. Tehran's reassessment of Hizbullah's usefulness has also led to the financial taps being turned off. The Hizbullah are said to be in a financial crisis which will quickly impact on the many social centers and hospitals they run. If the money tap is squeezed, its supporters could quickly melt away. As one Lebanese editor remarked, "The Hizbullah are very frightened about the post-hostage era. The hostages are ironically their best protection."