It started four years ago with some paintings tacked up on slotted boards along the two sides of an alley.

This weekend Capitol Hill's Festival of the Arts IV, heralded by bright banners, offers more than 200 juried art entries, 10 hours of daily entertainment by performers who had to audition for the job, and expects to draw crowds into the hundreds each day.

That shows what can happen when a grass-root arts show sprouts into a community event and neighborhood social.

The banners at the entrance to the courtyard of the Lutheran Church of Reformation, 212 East Capitol St., were blowing yesterday afternoon, along with the Dusty Rose rock group on its gig on the entertainment schedule.

No one was more appreciative in the audience that 3-year-old Sarah Dawson, there with her younger sister and babysitter, for the opening of the neighborhood event.

"This is no longer a church bazaar in the basement. The Capitol Hill community now has its own serious show of the audio-visual arts," Wanda Syverson, secretary-treasuer of the festival committee, observed amid her papers with names of exhibitors and entertainments.

This was the first year the art show was juried. The judges were staff members of the Renwick Gallery. Corcoran Gallery of Art, National Collection of Fine Arts and the National Gallery of Art.

That seriousness is reflected in some of the prices being asked: $2,520 for one sculpture; $2,205 for a cut-glass lampshade with wildflower design.

Entertainers had to pass a taped audition session. The Reformation Tigers, a group of neighborhood youngsters who beat drums, passed the test. For show visitors, there will be a cacaphony of music from pop and rock groups to the Monday Recorder Society and the Johnson Mt. Boys.

The Capitol Hill festival, which drew over 1,000 last year for two days, was expanded to three days this year. It will be on from nnon to 10 p.m. in the Lutheran Church of Reformation courtyard, with the art entries, including crafts and photography, spilling over into the air-conditioned parish hall.

It's free, but there is a donation box at the door with this note: "We are a non-profit show - with a cost overrun."