Gilbert Peake of Poolesville says that drivers of diesel-powered cars and trucks can cure more engine problems with his new $21.75 kit than with the commonly used $160 add-on water separators.

The problems are water, rust, sediment and other diesel-fuel contaminants that can stop those engines from running and necessitate repairs costing $400 and more.

Spokesmen for General Motors Corp. and Volkswagen of America Inc.--the main manufacturers of diesel-powered autos in this country--said that drivers of their vehicles no longer are encountering many of these problems, which the automakers assert were caused by service station operators who at first didn't know how to prevent diesel fuel from being contaminated.

But Peake said his customers include drivers of both older and newer diesel-powered GM and VW models.

Peake had bought a 1979 Oldsmobile 98 with a diesel engine at the beginning of 1982, but water in the fuel soon ruined the car's injector pump. Replacing it cost $400, while an add-on water separator--a device that goes between the fuel tank and the engine--cost another $160. "That worked fine" until it broke seven months later, Peake said.

"I've been a mechanic all my life," said Peake, who is a steam engineer at Shady Grove Hospital. "I figured I've got to find out a better solution."

He decided that "the best idea was to get to the problem." He figured that because water is heavier than diesel fuel, it would sit at the bottom of the car's fuel tank.

Why not just install a plug that would allow the motorist or mechanic to drain out the water and sediment each time the car was up on a lift for an oil change or other repairs? Peake asked himself.

Devising the plug took nearly five months. He bought a Volkswagen gas tank and peppered the bottom with test patches utilizing different fasteners and different adhesives until he came up with the winning combination.

The result is the Peake Performance Diesel Tank Drain Plug Kit, which is available from Peake Enterprises, Box 535, Poolesville, Md., 20837. He has applied for a patent.

The kit consists of a three-inch-square steel plate with a small hole in each of two corners and a half-inch-wide threaded hole in the center, a piece of sandpaper, a pouch of acrylic adhesive, two self-tapping screws, and a threaded plug.

The first steps in installing the kit are to raise the car on a lift, clean the lowest part of the bottom of the fuel tank and sand it lightly. The next are to spread adhesive on one side of the steel plate and stick it to the underside of the tank. Then small holes are drilled through the tank at the plate's corner holes and self-tapping screws with fuel-resistant collars are installed.

Finally, a hole is drilled through the center hole of the plate and into the bottom of the tank, allowing the fuel to begin dribbling out. When the fuel shows no sign of water or other contaminants such as sediment or rust, the threaded metal plug is inserted through a washer and into the center hole in the plate.

Then, when the car is on a lift for servicing, the plug can be removed, the fuel checked for contaminants, and the tank drained, if necessary.

According to Peake, add-on water separators, which cost $160 and up, are installed near the injector pump, where they cannot prevent sediment from clogging the filter on the tube that picks up fuel from the tank, while his $21.75 drain kit solves both water and sediment problems.

So far the venture has cost Peake about $6,000 and has resulted in the production of 500 kits. He said he has sold 200 "by word of mouth" over the past six months.

Peake said that some auto dealers will install his kits. George Hyman Construction Co. has installed kits on two of its trucks, and may fit up to 18 altogether, according to its assistant equipment manager, John D. Sumpter. Sumpter termed the kits "super, abolutely super. I personally feel they should be installed at the factory."

GM began offering diesel engines on autos in the 1978 model year, according to Tom Girvin, diesel emissions systems engineer with the Oldsmobile Division of GM, which builds that company's diesel auto engines.

Those engines have a mesh sock on the end of the tube that draws fuel from the tank. The sock will block water from entering the tube until between three and six gallons of water have accumulated in the tank, Girvin said. Then the fuel tank would have to be removed and drained.

GM later added a tube permitting the tank to be drained without removing it and a dashboard light warning the driver that there was water in the fuel.

"I would like to see a drain plug in the bottom of our fuel tank" but "our guys have been concerned about putting a plug at the low point of the tank" because of the danger of the car bottoming out or hitting an obstruction, stripping off the plug or causing it to leak, the GM engineer said.

He added that he doesn't like the idea of GM asking its customers to reach under the car to loosen the drain plug and then replace it, especially because he fears that some might crawl under the car instead of placing it on a lift.