CHARLIE AND ALGERNON -- At the Kennedy Center Terrace Theater through March 30.

The mouse is terrific. You've heard about the mouse? He dances up and down the man's arm, thumps his tail more or less to the music, and if he leaked a bit on opening night, well, nobody's perfect.

That's the Algernon part of "Charlie and Algernon," which the Folger Theatre Group is doing at the Kennedy Center's Terrace Theater.Charlie, as played by P.J. Benjamin, is just as clever, which is not only an assessment of the acting but the theme of the show.

Considering that it's about mental retardation, this story has had amazing popularity, first as a novel called "Flowers for Algernon," then as a movie called "Charly." This version, by David Rogers and Charles Strouse, is billed as "A Very Special Musical." Last season, "Benefit of a Doubt," a family drama the Folger did on mental retardation, was not taken to the public's heart even thought it had a gripping portrayal and raised difficult emotional questions. This isn't a subject audiences are generally crazy about, even now, when the theater has been dealing with horrendous physical ailments.

But the psy-fi story of Charly-Charlie, whom scientists bring from an I.Q. of 68 to Tilt before he drops back again, makes people feel good. All you have to do is to endorse the premise that a man who is kindly, docile and no bother to anyone should be treated nicely. And so should a mouse.

Not only does the retarded man act lovable and cooperative at all times, but, as a genius whose intellect is ebbing away, he absolves even the woman who supposedly loves him from the pain of having to continue their association. Only for a moment, when he has been made the world's greatest thinker through a mysterious mental operation that the mouse also had, is he allowed a flash of pique. It's not directed against the inadequacies of society in making life dignified for the retarded, but against those who apparently cured him -- for caring about "science" rather than about "feelings."

What if he engaged in anti-social behavior? What about the responsibilities of those close to him in dealing with his problems on a daily basis? What about the inadequacies of the institutional conditions to which he will return?

If the heroine, who was Charlie's teacher before becoming his lover, can walk away from these questions with her bland ingenue status intact, surely the audience can, too.It's not a "special" show in the sense of really being about retarded people; nor is the score, except for the title song, anything special.

But, like both its title characters, it's awfully cute.