TAIWAN goes to the polls in a legislative election tomorrow that is aimed at advancing democratic reform but threatens to worsen an ominous crisis in national identity.The election of a new National Assembly is a crucial step in the transformation of Taiwan's autocratic government into the first Chinese democracy in history. The new assembly will revise Taiwan's Constitution along democratic lines by mid-1992. The prospect of constitutional change has raised an explosive question of political identity: Will the government maintain its claim to represent all of China or acknowledge that its sovereignty is limited to Taiwan? A bitter debate over the question has recently threatened to provoke a hard-line reversal of democratic reforms and a conflict between Taiwan and the communist regime on mainland China. "The most serious problem of this island is the so-called crisis of national identity," says Hu Fu, a professor of political science at National Taiwan University. The ruling Nationalist Party, or Kuomintang (KMT), called the election after orchestrating the retirement of 325 deputies voted into the assembly in the last KMT-sponsored elections on mainland China in 1947. Since retreating to Taiwan in 1949, the KMT has relied on the elderly lawmakers to support its claim to sovereignty over all China. In recent years, as prosperity brought demands for democracy, the KMT has increasingly tried to base its power on the ballot box. But the more the KMT advances democratic reform, the more it allows calls for independence and increases the prospect of instability, say scholars and Western diplomats in Taiwan. In October, the Democratic Progressive Party (DPP), the leading opposition group, defined the lines of debate by endorsing independence. With this stance, the DPP is flirting with threats of suppression by the KMT government and invasion by communist forces on the mainland. Both the KMT and the mainland communists are so adamantly opposed to independence that the issue has been made far more explosive than the number of people who actually support it. Opinion polls show public support for independence ranges between 10 percent and 20 percent. The DPP says that while Taiwanese may not advocate outright independence, the majority of them resent the ban on public debate. Still, moderates in the KMT and DPP could cooperate after the election to reconcile the emerging democratic system with the KMT's need to maintain its claim to mainland sovereignty, say diplomats and scholars. Leaders from both moderate factions met this fall in an effort to resolve the independence dispute. The two moderate groups cooperate on some issues in the Legislative Yuan, Taiwan's chief lawmaking body. Indeed, on some issues the two moderate factions have more in common with each other than with the extremist wings in their own parties. "After the election probably the two groups will seek some kind of cooperative arrangement to fend off the extremists in their own parties," says Dr. Hu. "It would be possible for them to cooperate to push through a revised constitution, but not now," he adds. "It will take time to pacify the New Wave faction," the DPP's pro-independence group. The DPP's moderates may not have an opportunity to placate its radicals. In an effort to blunt the DPP's favorite campaign weapon, the government has threatened to arrest independence activists after the election. It arrested several separatists after the DPP's October embrace of independence. And the KMT has tried to present itself as indigenous to Taiwan rather than, in the words of separatists, a "foreign authority." On the hustings, numerous KMT candidates of mainland heritage forgo the mainland Mandarin dialect and instead speak in Taiwan's Min-nan dialect. Campaign advertisements on television more frequently use the island tongue than in past local elections. But even without threats and a folksy message, the KMT has the leg up on the opposition in securing a three-quarters majority of the 405 assembly seats. The KMT will have the support of all but a few of 80 assembly deputies elected in 1986 whose seats are not up this year. Also, the KMT's vast grass-roots organization is well suited to Taiwan's system of multiseat districts in which more than one candidate from the same party may seek votes in the same area. Deploying a sophisticated party apparatus that the opposition cannot hope to match, the KMT divides votes among its candidates in order to get the biggest electoral punch from each district. Moreover, the opposition has long accused the KMT of gerrymandering districts and using its unsurpassed financial resources to influence voting. "In each election, there are people involved in vote buying," Hsu Kuai-lin, secretary general of the central election commission, said yesterday. "Each year there are rumors about vote buying, but then after the election, there are no convictions because it seems there is insufficient evidence," says Mr. Hsu. After the election, he says, the government will reform the electoral system if a majority of the public believes the system is skewed in the KMT's favor.