With landscaping well under way and several new office buildings going up on the western end of Pennsylvania Avenue, attention has begun to shift slighty eastward to the eight-block area slated to be transformed into what might be termed an instant neighborhood.

Within that area, the Pennsylvania Avenue Development Corporation's plans five years ago called for a square, four-block housing complex behind the site where Kann's Department Store once stood. Sometimes compared to an Italian hillside village, it was a large ringed complex, somewhat fortress-like in design, full of townhouses that sloped down toward a center.

But times and markets have changed. Now that development is approaching, the plan is being reexamined by an architect and a market research firm hired by PADC, and PADC officials are meeting with city officials and city planning and housing groups to talk about what the area should look like.

At issue are the scale of the development, whether it should be spread over a larger area and balancing preservation of existing buildings with the need to produce a "critical mass" of housing.

"Our concerns are primarily as much preservation as possible of good buildings that are there and use of parts of those buildings for residential purposes," said Tom Lodge, who served for several years as chairman of the Advisory Neighborhood Commission that includes downtown.

Still another concern that Lodge raised when he met with PADC director Andrew Barnes and New York architect Edward Everett Barnes who has been hired to reexamine the design was "the spreading out of residential use through the whole area so there's some real life up and down the area and not a big, gigantic superbowl thing," he said.

When Lodge met with PADC officials, he represented the Citizens Planning Coalition for D.C. In addition city officials, the Metropolitan Washington Planning & Housing Association, the Committee of 100 for the Federal City and Don't Tear It Down have made known their own hopes and fears about the residential piece of Pennsylvania Avenue NW.

Ideas that have widespread support include reducing the scale of the four-block "superbowl" complex, letting small and medium-sized firms participate in the development instead of turning it over to one super-developer and making sure that the area helps draw tourists north from the Mall into the city's downtown shopping area.

"The city used to come right down to the mall," said architect John Wiebenson. Wiebenson is working with Metropolitan Washington Planning & Housing, an organization dating back to 1933 that helped create the city's original public housing authority.

Over the years, according to Wiebenson, an east-west layer of museums was built up between the Mall and the city. That was followed by the Federal Triangle, which created another buffer between the monument-museum area and the city. In the early 1970s, said Wiebenson, initial plans for revamping Pennsyvlania Avenue looked as if they might create still another layer separating the city from the Mall.

"The issue is getting tourists to the city. That's a key issue in the finances of this poor city," said Weibenson. "The city doesn't make any money off the Air and Space Museum or the Hirschhorn."

To do that, according to city planners, Wiebenson, PADC officials and others, developers of the Pennsylvania Avenue area will have to create some sort of north-south axis. Seventh Street NW is expected to be one, and 8th Street NW, which goes through the center of the residential area may be another.

There is a general concern among groups meeting with PADC, that the scale of the housing development, which adjoins the hulking J. Edgar Hoover Building, be somewhat less than monumental, said Charles Gueli, head of PADC's design department.

Besides not wanting the development to appear as a barrier between the Mall and downtown, advocates of less grand designs would also like to see some particpation in the area by small and medium-sized local developers, such as those who have redeveloped the Adams-Morgan and Mount Pleasant areas.

"We're concerned that it be done in such a way that it gives small developers an opportunity," said James Harvey, executive director of the Metropolitan Washington Planning & Housing Association. Splitting the four-block complex into smaller developments would be one way to do so. Harvey and others point out that, because minority developers are frequently small businesses, development on a smaller scale might also mean more chances for real participation by miniority firms.

Besides hiring the architect Barnes, PADC has also hired a Washington marketing firm, Hammer Siler George to review proposals for the area. The process should take about six months and will include sifting through the arguments of all the groups who have their own, sometimes competing, notions of what the area should finally look like.

All community groups agree on a need for more units, historic preservation and development on a scale that is less broad. Depending on the PADC's inclinations and financing, the area could take any one of a number of shapes.

For instance, Wiebenson's own proposals include four blocks developed separately in the area where the superbowl was planned. "Everything on the first floor (facing a north-south 8th Street) corridor would be tourist-oriented," he said. The street would be closed to all but pedestrian traffic and lined with attractions such as sidewalk cafes and art galleries.

Wiebenson also suggests moving the Trolley Museum downtown from Montgomery County and using old streetcars to link the Smithsonian with the National Portrait Gallery at the north end of 8th Street, with a loop around the residential area.

"You can slice it in a lot of different ways," said city planner John Fondersmith. "The whole question of how people move between the Mall and the retail area is a key."