John Denver and the Muppets are battling it out with Luciano Pavarotti in the Christmas-music bins this year. Watching the action are newcomers Willie Nelson and the Whispers as well as a cadre of old-timers ranging from Nat King Cole (and his brother Freddy) and the Mormon Tabernacle to Paul McCartney and the Eagles. At stake is the seasonal impulse to make money as well as Christmas music.

The Denver/Muppet "A Christmas Together" (RCA-AFL1-3451) must be Denver's solution to the poor sales of his previous Christmas record, "A Rocky Mountain Christmas" (RCA AFL1-120). Based on the successful television show (one suspects a package deal in here somewhere), it's either schmaltzy or insipid, depending on your view of Denver and/or The Muppets.

Pavarotti's "O Holy Night" (London 26473) is proving to be the pleasant surprise of the season, when so little else is. Released three years ago, the traditional album's sales have increased each year as the fabled Italian's tenor has reached increasingly wider audiences.

The Whispers' "Happy Holidays To You" (Solar BXL1-3489) is a pleasant excursion down the soul Christmas lane that has been traveled in past years by almost all of Motown's artists (The Supremes, Temptations, Miracles, and even Rare Earth! Only Stevie Wonder's "Someday at Christmas (Tamla 7-362) remains in print). Another great item still in print is "Funky Christmas) (Cotillion 9911) with Otis Redding and Wilson Pickett. It also is interesting to note that the Eagles' "Please Come Home for Christmas" single, released last year, is a remark of Charles Brown's 1959 R&B single; rock stations play the Eagle versions, but one can still hear Brown's original on many black stations at this time of year.

Willie Nelson's "Pretty Paper" (Columbia CJ-36189) is about what one would expect from a country artist who seems to put out a record every month. It's terribly uneven, with little care given to the choice of songs. That's an old tradition, too, as can be heard on any of two dozen Christmas offerings from country artists like Lynn Anderson, Merle Hggard, Charles Pride, Johnny Cash, Buck Owens and Red Sovine.

Ever since Phil Spector's fabled Cristmas record featuring the Ronettes, the Crystals and Bob B. Soxx and the Bluejeans, rock has kept mainly to singles. Recent entries have included Keith Richard's "Run, Rudolph, Run," and two local offerings -- Root Boy Slim's "Christmas at K Mart" and the Reign Deer's version of "White Christmas." Patti Smith has a version of that song too, produced by Todd Rundgren but only available to her fan club, at least this year.

Paul McCartney has his seasonal lightweight, "Rudolph the Red Nosed Reggae-"/"Wonderful Christmas Time." And Warner Brothers may have finally released the Jimi Hendrix record that makes his posthumous output greater than his living legacy, stringing together "The Little Drummer Boy," "Silent Night" and "Old Lang Syne." Copies were sent only to radio stations; if it gets enough airplay, look for it in the stores next year. Two new import singles are Squeeze's "Christmas Day" on A&M and the Greedies' "A Merry Jingle) on Vertigo; the latter group is made up of members of Thin Lizzle and the Sex Pistols.

There's also the Ravers' "Punk Rock Christmas" on Rhino Records. It follows the tradition of really unusual Christmas records bound to get little airplay. The trend may have started in 1959 with Huey "Piano" Smith's Christmas album on Ace that was effectively banned by many radio stations for its rather loose, disrespectful attitude to the spirit of the season. Smith and his Clowns did a manic boogie version of "Silent Night" that still sends shudders through R3B fanatics.

And who can forget the Singing Dogs Christmas single. Unfortunately, it found a hard time moving from the dog house to the record store. An album that made the reverse trip was the Mormon Tabernacle's "White Christmas" set of a few years back. It came in a box complete with recipes. Consumers stayed away in droves.

There are lots of unusual, if not out-right unique, Christmas albums that sell year after year. These are not hardy perennials like Nat King Cole (whose brother Freddy has a pleasant album, "Christmas Dreams," on Afrikka 15-007), Barbra Streisand, Mahalia Jackson and Bing Crosby. Among these must by counted the bobbish "Harry the Hipster Digs Chrismas" by Harry Gibson on Totem, the acoustic guitar fancies of John Fahey's "The New Possibility" and "Christmas With, Vol. 2" on Takoma, Justice Wilson's "Cajun Christmas" on Plantation, Joseph Byrd's electronic fantasies on "Christmas Yet To Come" on Tokoma, Larry Sparks and the Lonesome Ranblers Bluegrass and "Hark the Herald Angels Swing" from the World Greatest Jazz Band on their won WBJB label.

None of these will match the 128 million copies of over 500 versions of Johnny Marks' "Rudolph the Red Nose Reindeer." But they at least provide a vital variety: to each musical style, its own blessings and a Happy New Year.