LONDON -- It is 1906 and elegantly dressed diners in New York's ostentatious Delmonico's restaurant are buzzing over brandy and cigars about the scandal surrounding society beauty Evelyn Nesbit.

In stalks director Milos Forman, stocky, square-jawed, wearing blue jeans and brightly colored tennis shoes. Clutching a long fat cigar, he quietly discusses the scene with a roomful of actors and actresses, and with his longtime cinematographer, fellow Czech emigre Miroslav Ondricek, before pacing impatiently to the periphery and commanding the action to begin.

The entrance of the haughtily beautiful Nesbit, trailing reporters and photographers, creates a swirl of excitement.

Everything appears as it would have 74 years ago, from the gilded decor and glittering chandeliers of Delmonico's to the diners' turn-of-the-century finery and the photographers' exploding flash powder.

The meticulously detailed dining room is only one of a number of carefully crafted reproductions of high-society New York in the ragtime era of 1906 scattered around Shepperton Studios in the suburban countryside just outside London.

Inside the other giant sound stages, each as big as an airplane hangar, are the sumptuous interior of banker J. P. Morgan's private library on the corner of Madison Avenue and 36th Street; the richly furnished parlor of an elderly widow's brownstone across the street; and the glittering open-air nightclub on the roof of architect Stanford White's most celebrated creation, Madison Square Garden. On the back lot, in a cow pasture, stand several whole blocks of Madison Avenue and 36th Street, around the imposing white marble Morgan Library -- six acres of period buildings and facades expensively reconstructed from the evidence of old photographs.

Populating these scenes for the ambitious film version of E. L. Doctorow's best-selling 1975 novel, "Ragtime" -- an impressionistic and panoramic narrative about America's early 20th-century loss of innocence -- are mostly anonymous actors and extras primarily contributing to the lively authenticity of the period atmosphere. Even the principal roles, like the main characters of the several stories Doctorow intertwines in "Ragtime" with the Dickensian device of uncanny coincidence, are played by actors and actresses to whom we do not remember being introduced before, though we are likely to become quickly familiar with their distinct personalities.

But just as celebrities like Harry Houdini, Sigmund Freud, Morgan and Henry Ford do their star turns in Doctorow's book, nostalgic show-business celebrities pop up on the set in relatively minor roles. Among them are Donald O'Connor, Pat O'Brien and, in his first film appearance after two decades in retirement, 81-year-old James Cagney. There is also Norman Mailer, celebrated author and bon vivant, portraying celebrated architect and bon vivant Stanford White. In one of the many real-life incidents woven into the fictional narrative of "Ragtime," White is shot to death at his nightclub table atop Madison Square Garden by eccentric millionaire Harry K. Thaw, who was jealous of White's attentions to his wife, Evelyn Nesbit.

"We are trying to do with the book what Doctorow did with historical fact -- developing our own vision from it," said Milos Forman, puffing on his ever-present cigar during a break from the hectic final weeks of shooting here just before Christmas. "We are trying to give the audience a feeling for the people of that era, to convey the texture of the book as pageantry."

The film will focus more closely than the book on its central characters -- the members of a white, upper-middle-class suburban New York family and Coalhouse Walker, the proud, angry young black man who changes all their lives. But it is also intended to remain faithful to the book in suffusing the story with the feel of life in New York during the rapidly changing period between the Gay '90s and the First World War, with its new automobiles and motion pictues, waves of immigrants and growing gap between rich and poor.

When "Ragtime" was published in 1975, Forman found it "by far the most interesting and intelligent piece of literature I had read in a long time." When he was later asked by independent producer Dino de Laurentis to direct the film version of the book, Forman said, "There was not much question about saying yes."

But he admitted that he and de Laurentiis are taking a big risk. The $20-million budget for "Ragtime" -- scheduled for release next summer -- is a lot of money for a film of an essentially experimental novel published nearly six yers ago. It features only one big-name star -- Cagney -- in a character role that does not begin until near the film's end. Wearing a handlebar mustache, bowler hat and granny glasses, Cagney plays New York police chief Rheinlander Waldo, a historical figure mentioned in passing in the book, who in the film directs the climactic siege of the Morgan Library after black rebel Coalhouse Walker and his followers seize it and threaten to blow it up.

Despite the tight shooting schedule and cost control that have made de Laurentiis so successful as an independent producer with several hundred films under his belt, "Ragtime's" large cast, expensive sets here and extensive on-location filming earlier this year in New York City, Westchester County, Connecticut and New Jersey will cost a little more than twice as much as the average American film today. It is twice as expensive as "Star Wars," with all its special effects although only about half the price of this year's $40-million fiasco, "Heaven's Gate."

"It is very daring to do a film of this budget about something so literary," said 38-year-old American playwright Michael Weller, who wrote the "Ragtime" screenplay with help from Forman and approval of Doctorow. "It is not an easily classifable film. It's not part of any current industry trend." n

"Milos is a perfectionist who makes his movies in casting and in the cutting room," said Bernard Williams, the film's British co-producer. "He's a brilliant casting director who finds just the right people. Then he shoots so much footage [about 650,000 feet of film, of which only about 15,000 will make it to the screen in the two-hour final cut] that he can put together the best performances from everybody."

Persuading Cagney to come out of retirement, Williams said, was Forman's casting coup. Forman knew Cagney socially and had told him of his enthusiasm for "Ragtime." This eventually led to joking about Cagney coming back to work in the movie, and the talk eventually became reality.Cagney last acted for Billy Wilder in "One, Two, Three," released in 1960.

With Cagney came Pat O'Brien, who plays Harry K. Thaw's criminal lawyer; O'Brien's wife, Eloise, who plays Thaw's mother; and Donald O'Connor, who portrays a dancing instructor to Evelyn Nesbit and a vaudeville star of the musical revue playing on the Madison Square Garden roof when Thaw shoots White.

"Cagney came over to England on the Queen Elizabeth II with the O'Briens and they toured Europe together," Williams said. "They were delightful to work with. It was wonderful to see this old professionalism coming through."

Williams also realized that Cagney would be an important box-office draw for the expensive film. He also said he believes "Ragtime" remains a timely subject for the screen, even though its questioning of national though its questioning of national values may have played better during of the 1980s. "Ragtime" was on American best-seller lists for 60 weeks in the mid-'70s. There are now 3 million paperback copies in print, it still sells steadily.

"This is a very prestigious movie for Dino [de Laurentiis], a qualilty movie that could become a classic," Williams said. "He bought the film rights for the book before it was even published. He loved it, believed in it and stayed with it through everything."

Everything in the project has meant more than the usual share of hidden hazards of the business. De Laurentiis first hired and them fired Robert Altman as the film's intended director, an episode nobody now wants to discuss. Then he had to wait for Forman to finish the film version of the stage musical "Hair." Forman collaborated for the first time with Weller on the "Hair" script and brought him along to "Ragtime," helping train him in both screenwriting and directing. Forman, who wrote his own scripts for his first films, including the widley acclaimed "Fireman's Ball," believed he lacked sufficent roots in America to write easily about uniquely American subjects.

Financing the film was the next problem. De Laurentiis, who produces movies as complete packages for a variety of investors, was unable to stir interest in "Ragtime" among the major film companies or investors. He wound up raising 75 percent of the money from a British indusrial conglomerate, Sunley, which has put money into movies before, and selling the distribution rights to Filmways.

As a result, "Ragtime," a quintessentially American film, is being made with mostly British money by an Italian producer, British and American executive producers, a Czech director and cinematographer, and British and American actors, technicians and locations.

In American, East 11th Street in New York, where most of the buildings and some of the shops have not changed since 1900, was perfect for early on-location filming of the scenes in immigrant neighborhoods of the Lower East Side. Suburban Westchester and Connecticut sites were found to portray turn-of-the-century New Rochelle, and the few remaining Victorian beachfront hotels in Spring Lake, N.J., were substituted for Atlantic City.

But the Morgan Library would not allow filming there, partly because it would have to be wired with fake explosives, and the streets around the Italian Renaissance-style landmark on Madison Avenue have become too modern. So the intersection of Madison Avenue and 36th Street -- as well as the big interiors -- were built in England, where such costs despite high inflation, are still a third less than in Hollywood. That kind of saving, plus the considerable technical expertise at London's several remaining film studios, has kept movie-making very much alive in Britan, despite the decline of the British film.

"It has been hard to translate 'Ragtime' to the screen," explained Weller, whose stage credits include a successful Arena Stage production of "Loose Ends" a few years ago. "The novel reads almost like peotry, with its imagery and playing around with history.

"We neeeded to establish the story line more, with various historical about having too many characters and strands of story. We didn't want to confuse the audience. It reminds me a bit of Elizabethan drama with its many levels, its panorama of life and its plots and subplots."

"The star of the movie is ragtime, and New York City of 1906," said co-producer Williams. "That's why it couldn't have stars in the principal roles."

"Big stars would not fit the main characters of 'Ragtime,' " said Forman, who characteristically interviewed more than 1,000 actors and actresses for about 180 large and small parts in the film. "Some stars were in consideration," he said, "but the people we picked were more right for the characters."

This is the system by which the Chech-born director -- a refugee from communist government interference in the arts and now an American citizen -- cast all seven of his previous movies. Those include "One Flew Over the Cuckoo's Nest," Which won Academy Awards for best picture, best director, best actor and best actress in 1975. The only big-name star in it was Jack Nicholson, and Forman later said that "personalities tend to detract from a character."

"I was aware the film was very much an ensemble piece, and that all my films have been like that, too," Forman once recalled revealingly about "Cuckoo's Nest." "I'm not one for stars. And I was terrified that Jack was going to overpower everyone else -- it drives me crazy when that happens, when everybody looks alike except the star. But Jack never, ever did that. It's why he is so good in the part. He submerged himself with the others, yet he gives this terrific performance."

As usual Forman cast "Ragtime" from his personal interviews with actors and actresses without watching their previous performances, which he believes could mislead his judgement. Howard Rollins, whose portrayal of Coalhouse Walker has particularly excited, everyone involved with "Ragtime," was introduced to Forman by his agent. "I had never seen him before," Forman said.

While not star "personalities" of the kind Forman avoids, Rollins and many of the other featured players -- especially Elizabeth McGovern as Evelyn Nesbit, Robert Joy as Harry K. Thaw and Debbie Allen as Coalhouse Walker's fiance Sarah -- all have strong screen personalities. Forman said that was one reason why he chose each of them.

"The more characters you have, and 'Ragtime' is crowded with characters, the less space you have for each of them," he explained. "Besides being fine actors, they have very specific personalities of their own for me to try to use."

"Star Wars," "Superman," "Flash Grdon" and "2001," among many American films, were made in Britian. Countless others are sent here for their end-of-production mixing and other techincal fine-tuning, as "Ragtime" will be.

"Nobody is out of work in the British film industry," said "Ragtime's" British production designer, John Graysmark, who said he has been working here on American films for most of his 25-year career. "These movies are made by American companies and American directors but with English technicians."

Nevertheless, British unions are still unhappy about hoards of American actors and technicians coming to work on American films here. They balked at Forman's unprecedented request for work permits for nearly 50 American actors and technicians for "Ragtime," even after he had interviewed 300 American actors resident in England and cast 50 of them for mostly non-speaking parts. Williams finally convinced the unions and the British government, which made the final decision, that refusing the work permits would not only cost the jobs of the hundreds of British people already at work on the movie at Shepperton Studios but also reduce the possiblity of making movies here with international backing and work forces.

On top of that, the American actors' strike began just when the shooting of guillotine was the prospect of a long delay that could push the film's cost into the prohibitve $30-million range. While Forman, a dour, tense man at work, fumed in his midtown Manhattan office over the future of his million-dollar-a-week shooting schedule, Williams negotiated a unique compromise agreement for the independent production: If the work went ahead, Ragtime Productions Ltd. would match at the strike's end whatever major studios agreed with the actor's union.

"Sure, this film is a risk. every movie is a risk," growled Forman, impatient to get back behind the camera inside Delmonico's "My feeling about this one changes every minute, every day. Sometimes I'm way up, sometimes way down. But I know we are doing something we won't be ashamed of."