"TRUTH," Ursula Le Guin has written, "is a matter of imagination. Facts are about the outside. Truth is about the inside." I cite Le Guin because she is one of those masters of imaginative literature whose work I turn to again and again. Any new work with her name on it signals to me that a feast of the imagination is waiting. If she has any shortcomings, it is that she errs on the side of the serious and short-changes humor, but I will forgive her that for her other virtues.

Five fantasy authors whose works I have enjoyed enormously over the years are out with new books for young readers that try, in various ways, to deal with the truth inside, with varying degrees of success. Some of them, like Le Guin, wouldn't know a bellylaugh (at least in print) if it whacked them on the head with a slapstick, others use humor to underline the truth.

Diana Wynne Jones is one of those English wonders who can combine high wit with wisdom. Her sense of humor weaves in and out of the most absurd plots and twists around outrageous situations with a deftness any vaudevillian would envy. That sense of the absurd is as evident in her first collection of short stories, Warlock at the Wheel and Other Stories (Greenwillow, $10.25; ages 10-up) as in any of her superb novels. But a number of the individual pieces seem cramped as if Jones needs a larger canvas on which to paint the bright, wild colors of her tales. The title story, for example, is more anecdote than short story. Another, "The Fluffy Pink Toadstool," is a shaggy fungus story. Yet, when she is good, as in the wonderful "Aunt Bea's Day Out," in which an overbearing aunt gets her comeuppance, she is very good indeed. And the best story in the collection, "No One," in which a fully automated house and a robot in charge of the young master Edward defeat a quartet of wicked but incompetent kidnappers, is a riot, a breathless series of escalating absurdities which says as much about our love of automation as our fear of it. Adults as well as young readers will enjoy that tale especially.

Laurence Yep, a Newbery Honor Book winner, who first came to children's books side-slipping from adult science fiction, has found himself a comfortable niche in Oriental flavored fantasies. His new novel Dragon Steel (Harper & Row, $12.50; ages 10-up) is the middle book of a series, presumably a trilogy. The viewpoint character is a dragon princess named Shimmer and she tells a story that includes a cast of thousands -- dragons, krakens, monkeys, firebirds, and some humans, plus a wizard called Master of Seventy-Two Transformations. The book is talky in places, fast-paced in others, and proceeds from one cliffhanger to the next. Yep's colloquial prose style seems to fit oddly with the high fantasy elements, and I foundthat jarring at worst. But the adventures are full of imagination and there is a kind of breezy zestiness to this that will appeal to younger young adults.

For most young readers, historical novels serve much the same purpose as fantasy books if the time and place are sufficiently odd and far away. Chelsea Quinn Yarbro's second YA novel, Four Horses for Tishtry (Harper, $12.50; ages 10-up) is set in Nero's Rome and concerns an adolescent who has trained all of her life to be a bestiarii, a performer in the arenas. Tishtry, a young slave, works with four horses yoked together and can walk, flip, and somersault across their backs as they race around the packed sand. The language, the attention to lore, and to the minutiae of everyday life lend the novel its sense of magic. If only the story development and the characters were as engaging as the details. But the plot creaks along from climax to climax, led there more by authorial fiat than action. From the hand of the master storyteller who brought readers the St. Germain books, I was expecting more. It is as if she pulled back her storytelling power just when it was most needed -- for young readers. And Tishtry herself, while as talented in her field as a Mary Lou Retton, has about as much personality.

MARY GENTLE's A Hawk in Silver (Lothrop, Lee and Shepard, $10.25; ages 10-up) is a book split in two. It is about a lower-class British schoolgirl named Holly and her friend Chris (nicknamed "Ivy") who stumble onto warring exiles from Faery. Part of the book is decidedly mundane, earthbound, and as ungrammatical as the girls when Holly and her friend try to escape the atttentions of a bullying schoolmate. The other half is in the high style when Holly and Ivy pull the readers with them into the great battles between faery factions. But unfortunately the two halves do not form a smooth mesh. The school incidents are only partially fleshed out, with unseen teachers, principal,and parents laying down laws. There is also a dying grandfather whose funeral is supposed to be pivotal but is curiously unmoving. The high-flown language and lore of the battling folk of the Hollow Hills, long-lived alien exiles who want desperately to return to their home, is tantalizing but there is simply not enough of it.

In Deep Wizardry (Delacorte, $15.95; ages 10-up) Diane Duane has employed many of the same elements: two young school friends in the modern world, two warring factions of a magical world, and the problems of the crossings between. But what a difference! There is a seamlessness about the book, and a growing power that grips the reader and refuses to let go.

Duane's first book about the 13-year-old wizard Nita and her partner in magic, 12- year-old Kit, So You Want to be a Wizard, was a fandango of urban renewal, talking cars, and evil lurking beneath the streets of an alternate Manhattan. It was fun, funny, and very clever. But Deep Wizardry is more. This time Nita and Kit battle the Lone Power (alternately called the Old Serpent) under the Atlantic Ocean just off the Long Island coast. As the title of the book suggests, the novel is deeply resonant, provocative, and moving. Shape-shifting into whales, the two young wizards take part in the great ceremony called "Song of the Twelve," a ritual enactment of sacrifice that takes place in the deepest Atlantic trench. The poetry of the ritual is as dark and strong as any of the old incantations. The descriptions of the world under the water are precise, poetic, and masterful. And the depiction of ed'Rashtekaresket, the Pale One, the great white shark whose role in the enactment is both as slayer and savior, is one of the most riveting in the literature of childhood. Duane has been a clown, a craftsman, a player with words before this. In this book she moves, quite literally, into another dimension.