CHARLIE AND ALGERNON, a musical with book and lyrics by David Rogers, and music by Charles Strouse, from the novel, "Flower for Algernon" by Daniel Keys; directed by Louis W. Scheeder, orchestrations by Philip J. Lang; musical director and conductor, Liza Redfield; settings by Kate Edmunds; costumes by Jess Goldstein; lighting by Hugh Lester; choreography by Virginia Freeman.

With P.J. Benjamin, Sandy Faison, Chev Rogers, Robert Sevra, Julienne Marie and Nancy Franklin.

At the Terrace Theater through March 30.

One of the oldest rules of the theater is that musicals with dancing white mice never fail.

"Charlie and Algernon" not only has such a mouse but, to keep him company also has a superior human co-star, a pleasant score, an imaginative book, refreshing, no-nonsense choreography and that rarest of musical comedy components, an interesting idea. Could anyone ask for more?

Well, anyone with a fondness for logic could, yes, ask for a trifle more. But if there were quibbles in the air after Saturday night's opening at the Terrace Theater, they were thoroughly drowned out by applause. That will probably remain the case wherever and whenever this audience-pleasing production is performed.

Based on Daniel Keyes' 1966 novel, which inspired the 1968 movie "Charlie" with Cliff Robinson, "Charlie and Algernon" is a comic science-fiction parable about a man whose IQ soars from sub- to super-normal after some newfangled brain surgery. The technique was first tested on a mouse named Algernon, who tripled his speed through a maze as a result.

To verify the operation's effectiveness in humans, man and mouse get to race each other through mazes with identical layouts, appropriately portioned.

Charlie not only bests the mouse, but with the help of a dedicated teacher who taught him in his retarded days, is soon reading "War and Peace" overnight and studying eight languages, "five alive and three dead." And as his perpetual glazed grin and slouched posture give way to tapered sport jackets and a suave manner, he falls in love with his teacher, a development that gives her serious professional pause.

Despite the subject matter, "Charlie and Algernon" is a cheery show that will not greatly unsettle anyone who expects another "Annie" from composer Charles Strouse. The hero's retarded phase lasts for only a few brief scenes, and author David Rogers, director Louis W. scheeder and star P.J. Benjamin have conspired to present us with one of the least disturbing portrayals of a disadvantage in memory.

While taking a Rorschach test, Charlie announces that he sees a "big ink blot." When the doctors explain that he should pretend to see something else, Charlie obliges by saying, "I pretend somebody spilled a big bottle of ink."

So, at the other end of the potential-audience spectrum, anyone who goes to this show expecting a realistic treatment of mental retardation will feel cheated. But underneath "Charlie and Algernon's" candy-coated shell, there is good medicine for what ails the world of musical comedy. Rogers, Strouse, Scheder & Co. have taken a small story and created a small, snappy and not entirely frivolous entertainment, dispensing with the dead weight -- the clumsy scenery, the vast ensembles, the thunderous orchestras and the hyped-up sound -- that has dragged the medium down.

And they have put their life-sized show into a life-sized theater where virtually every note and every word rings loud and clear. Grand opera may be another model for the musical to follow as it angles for survival, but how many "Evitas" and "Sweeney Todds" can there be?

Just an elevator ride away, "Swing," at the Opera House, shows the desperation to which the need to fill bigger and more impersonal auditoriums has driven some producers. And curiously, the Kennedy Center provides another point of comparison for "Charlie and Algernon" in "The Elephant Man," now at the Eisenhower Theater. Both are richly theatrical productions about misfits who reveal spectacular qualities when they are adopted by men of science.

As a musical, "Charlie and Algernon" is a sharp departure for director Scheeder and his Folger Theater Group, but it has not thrown anyone off stride. The songs flow smoothly out of the dialogue and smoothly back into it again, and choreographer Virginia Freeman's work fits just as snugly into its surroundings. Freeman, the Folger's regular choreographer, has created two evocative and uncliched psychological dance sequences to illustrate Charlie's worries, and that's a form of show dancing that has been highly conductive to pretension in the past.

As Charlie, P.J. Benjamin is a valuable find (although he probably doesn't realize he was lost). Benjamin not only has the basic skills of a fine musical comedy actor, but he applies them confidently and emphatically. This is a part that calls on him to summarize the plots of "Robinson Crusoe," "War and Peace" and "Dr. Jekyll and Mr. Hyde" in one number, and -- mentioned earlier -- to work extensively with a mouse in another.

It is a part, in short, that is full of challenges, and Benjamin faces them down -- all except the problem of how to portray Charlie before his operation. dHere he makes the character about 50 percent too cute to bear.

The rest of the cast is top flight, and Julienne Marie, in the small role of Charlie's mother, travels in a slightly higher orbit yet.

David Rogers, author of both the book and the lyrics, has a bountiful imagination that is one of the play's greatest assets. But the plot has nearly as many holes as Washington's streets this time of year, and the level of realism varies wildly.It might be possible, for example, to justify the decision of Charlie's former co-workers virtually to disown him when he becomes a genius but the script offers no remotely convincing motivation, except that it helps advance the plot from Point X to Point Y.

There is an equally unmotivated and not very interesting conflict between the two surgeons who have made Charlie what he is, about how fast they should move to apply their techniques. And perhaps the biggest weakness of the book is the underlying notion that because a man is retarded, he has no appreciation of evil.

But "Charlie and Algernon" is science fiction and musical comedy, which gives it two complementary excuses for loose logic. And just as Charlie hopes to blaze a trail for other men of elevated intelligence, so "Charlie and Algernon" should blaze a trail for the more intelligent musical.