In a move that may undercut both industry and government arguments that cured meat products are unsafe if they do not contain sodium nitrite, Gwaltney, a Smithfield, Va., meat packer, has begun selling nonfrozen, nitritefree bacon under the label Williamsburg Old-Fashioned Cure Bacon.

The first company to do so on a large-scale commercial basis, Gwaltney products are soldalong the East Coast in conventional supermarkets.

The rest of the industry is taking a wait-and-see attitude. Said a representative of one large meat packer: "It's an old process and produces a very salty product which is too costly."

The bacon has twice the salt content of nitrite-cured bacon and costs as much as $1 per pound more.

Ever since questions first were raised about the possibility that nitrosamines (a combination of nitrites and amines) might cause cancer, meat processors have insisted that without the nitrites, which color and flavor processed meats while preserving them, products would be subject to contamination with clostridium botulinum -- the botulism toxins often fatal to humans.

Despite this position, numerous small, local manufacturers produce nitrite-free meats sold in natural food stores or farmer's markets. The nitrite-free hams and bacons are usually dry-salt cured, the method being employed by Gwaltney; the other products are often frozen to preserve them.

Although sodium nitrite is used in almost all the cured meats -- ham, hot dogs, salami, bologna, liverwurst -- it is bacon that has drawn the most attention because it forms its own nitroamines when fried. Until last year, scientists believed that it was the combination of nitrites with amines, nitroamines, that was carcinogenic in test animals. Work done by Dr. Paul Newberne at Massachusetts Institute of Technology implicates nitrites alone as carcinogens. Newberne's study is under review.

The Department of Agriculture has been moving to reduce nitrite levels in cured meats, particularly in bacon, calling for an eventual phase-out of the chemical. But the Justice Department soon may tell USDA that if Newberne's study holds up and nitrites are unsafe, they could not be phased out, theywould have to be banned immediately.

Agriculture Secretary Bob Bergland said recently that if the Justice Department ruled an immediate ban was in order, USDA might ask Congress for a one-year moratorium, during which time the agency would seek legislation permitting a risk-benefit analysis of nitrites.

Gwaltney's move may make a riskbenefit analysis moot. And Assistant Agriculture Secretary Carol Foreman is "delighted with any and all industry efforts to find alternative means for processing."

The high salt content, however, creates a different, though less serious problem. For many, the bacon tastes too salty. At a breakfast for reporters yesterday, a home economist demonstrated how some of the salt can be removed: Before frying, the bacon is off, then simmered in a little water for 3 or 4 minutes. Unfortunately, current package directions do not suggest this cooking procedure.

Even though a 12-ounce package of the nitrite-free bacon sells for $1.99, ($2.65 a pound) Gwaltney, a subsidiary of ITT-Continental Baking Co., is optimistic about sales.

The company's bacon sales last year were about$20 million. This year Gwaltney is "conservatively" projecting that the nitrite-free bacon will gross about $1 million.