FICTION; The Gallery, by John Horne Burns (Arbor House Library of Contemporary Americana, $6.95). Virtually unknown to the reading public, this novel about World War II was published in 1947 and quickly forgotten, eclipsed by the popularity of Mailer's The Naked and the Dead, Irwin Shaw's The Young Lions and James Jones' From Here to Eternity. But many influential critics now regard it as the best American novel about the war. Set in newly liberated Naples in 1944, the story explores the lives of several American soldiers and Italian civilians whose paths have crossed in a shopping arcade, the Galleria Umberto.

Edwin Mullhouse: The Life and Death of an American Writer, 1943-1954, by Jeffrey Cartwritght, by Steven Millhauser (Penguin, $6.95). "Edwin Abraham Mullhouse, whose tragic death at 1:06 a.m. on August 1, 1954, deprived America of her most gifted writer . . . " begins Steven Millhauser's sparkling spoof on literary biography. It follows that Mullhouse, a novelist at 10, died at age 11. Cartwright, his best friend, follows him from pre-kindergarten to the fulfillment of his literary genius in the sixth grade. Once its structure is understood, the novel displays enormous charm.

Hermsprong or Man As He Is Not, by Robert Bage (Oxford, $4.95). First published in 1796, this is the last of six novels written by a successful paper manufacturer preoccupied with English reactions to the French Revolution. Well-versed in the ideas of the day, Bage adapted the witty style of Voltaire to an English setting in penning one of the finest political novels in the language. The oddly-named protagonist may be a romantic throwback -- a young man raised by American Indians who arrives in England fresh from a look at the latest in French radicalism -- but the novelist exhibits a thoroughly modern sympathy for the legal and sexual emancipation of women.

Afro-American Folktales: Stories from Black Traditions in the New World, selected and edited by Roger D. Abrahams (Pantheon, $11.95). This, the newest title in Pantheon's fairytale and folktale library, collects stories from Caribbean islands, contemporary streetcorners, and the antebellum south. The most affecting yarns are cautionary, spun to advise slaves on how to deal with masters. In one brief tale, a turtle in a pond talks freely to a slave; but when he runs to fetch his skeptical master, the turtle clams up (if you will). The slave gets a beating for retailing fancies. Later, when slave and turtle are alone together again, the turtle delivers the punch warning: "Well, that's what I say about you negroes, you talk too much anyhow."

Dust Tracks on a Road: An Autobiography, by Zora Neale Hurston (University of Illinois Press, $8.95) and Spunk: The Selected Short Stories of Zora Neale Hurston (Turtle Island Foundation, 2845 Buena Vista Way, Berkeley, Calif. 94708). Though she died in obscurity, Zora Neale Hurston (1901-1960) is a very importantc figure in black American culture. Her subjects are the people of the rural South, in particular the people of Eatonville, Fla. Nowadays unjustly neglected, Hurston is thought by many to be right up with the best of America's 20th-century writers. Her autobiography details a hard life and contains some very spiky opinions on race and politics. The language is often delightfully original: "I have been in Sorrow's kitchen and licked out all the pots. Then I have stood on the peaky mountain wrapped in rainbows, with a harp and a sword in my hands." Spunk reprints the Eatonville stories that first established her reputation. They are peopled with con-men, vengeful lovers and strong and resourceful women. NONFICTION

Picasso, by Gertrude Stein (Dover, $3.95). The great art critics have nearly always been poets and novelists of a parallel esthetic: think of Baudelaire writing about the Paris Salons, John Ashbery defining the New York School, Rilke paying homage to Rodin. Or the mutual admiration of Gertrude Stein and Pablo Picasso. In this monograph -- first published in 1938 -- Stein describes her encounters with Picasso, their growing friendship, his stormy relations with Apollinaire, Matisse, and others, and the nature of his imagination. The result is a brilliant appreciation, at once an introduction to Steinian prose and Picasso's pictorial universe.

Diane Arbus: A Biography, by Patricia Bosworth (Avon, $8.95). Diane Arbus n,ee Nemerov was the protected child of wealthy parents, she was perhaps the most famous young photographer in America, she intentionally sought out the perverse, the deformed and the strange -- transvestites, midgets and nudists. In her images she made us see the normal in the freakish and the freakish in the normal. But she knew nameless terrors and despite professional success she gradually slid into into madness. A year after her suicide in 1971, a Venice show established her reputation as the iconographer of the '60s. This is her life, brilliantly told.

Overlord, by Max Hastings (Touchstone, $8.95). No one alive at the time will ever forget the electrifying news of D-Day on June 6, 1944. When Allied troops stormed ashore in Normandy, in the largest amphibious landings ever attempted, free peoples everywhere prayed for victory and a quick end to a stubborn, deadly war already in its fifth year. Here the distinguished BBC combat correspondent (who is incidentally writing the Oxford History of World War II) catches the events of those heady days with verve and precision.

The Assault on Truth: Freud's Suppression of the Seduction Theory, by Jeffrey Moussaieff Masson (Pengin, $7.95). One of the most gripping tours de force in recent American letters was Janet Malcolm's two-part New Yorker article on Jeffrey Masson, the young man who ingratiated himself with his elders to the point where he became heir apparent to the directorship of the Freud Archives -- only to turn traitor and accuse the master of intellectual dishonesty. Freud suppressed the facts about sexual abuse of children, Masson argued, in favor of a pet theory that such traumas were fantasies. The seduction theory, in turn, became a linchpin of Freudian psychoanalysis. In this book, Masson -- older now and drummed out of the Freudian establishment -- develops his thesis in detail and, in a new preface for the paperback editon, replies to Malcolm and his other detractors.