The legal battle between poet and novelist Erica Jong and the Smithsonian Institution took a new twist yesterday.

The dispute arose in 1974 when Jong, author of "Fear of Flying," withdrew from the Smithsonian's Resident Associates speakers series after twice being told that she could not speak on either sex or politics.

According to American Civil Liberties Union attorney Ralph Temple, an out-of-court settlement between Jong and the Smithsonian was reached Thursday. But, he said, yesterday Smithsonian general counsel Peter Powers phoned to tell him the settlement was suspended.

Powers was out of town and could not be reached yesterday for comments.

After the 1974 incident, it was revealed that Smithsonian Secretary S. Dillon Ripley was, in the words of a memorandum he signed, "strongly opposed to the lecture by Ms. Jong" and wanted it canceled "if it is convenient."

In the same memo, Ripley ordered that no more "contemporary novelists or poets" could be booked for associates programs and said all associates activities should be geared toward fund-raising for the institution and deal only with art, history or science.

Ripley said at the time he did not consider the Jong incident a matter of "censorship," but the ACLU offered Jong assistance in the case, saying it appeared to be an infringement of free speech.

Temple said yesterday that agreement was reached with the Smithsonian on Thursday.

He said the Smithsonian agreed to issue a policy statement to its personnel providing that no effort would be made to control the content of a selected speaker's statements, nor would any potential speaker be excluded from selection, in an effort to prevent "embarrassment, impropriety or controversiality."

The agreement also stipulated that Jong would be reinvited to speak at the Smithsonian this fall, he said.

On Thursday afternoon, Temple sent a copy to the Smithsonian of the public statement the ACLU was planning to issue at a press conference scheduled for yesterday. According to Temple, the statement cited concerns the Smithsonian has had with speakers since 1972.

After receiving the statement, Temple said, Powers called him and asked him not to issue the ACLU statment. "They said, in effect, "if you go ahead with the press conference, the settlement is suspended.'" The ACLU held the press conference as scheduled in New York.

Lawrence Taylor, Smithsonian coordinator of public information said "I have no comment at this time." Ripley was in London and could not be reached.

Jong, reached at her home in Connecticut, said "I was delighted that we had settled our dispute, and I was looking forward to going back there to read. Now it seems like we are seeing a repeat of what happened in 1974 in that we are being told what we may say and what we may not say.

"The spirit of the agreement has been jeopardized by this new attempt at censorship, said Jong, "but I still hope that we may reach an agreement because I think the Smithonian is a great institution."