"The purpose of this evening is to honor Walter Cronkite," said master of ceremonies Art Buchwald, pausing to watch 1,000 faces in front of him look trustingly at Walter Cronkite.

"Actually," Buchwald corrected himself, "the purpose is to raise money for mental health by honoring Walter Cronkite. Walter Cronkite is the most honored man in America . . . Honor is Walter Cronkite's middle name . . . Walter Cronkite is the most trusted man in America."

And that's the way it was last night as the National Mental Health Association paid tribute to the veteran journalist who made his reputation with his objectivity. Last night, however, he had his say.

"President Reagan is absolutely right about the part volunteerism plays in this nation of ours," said Cronkite, lauding the audience of volunteers and others who had voluntarily paid $150 and $200 a ticket. "But President Reagan is dead wrong in his belief that volunteerism can do it all in this country."

Cronkite said nobody wants to waste taxpayers' money, but basic research in such areas as social issues and armaments has to be properly financed by the government.

"We'd be blind to the issue if we let this evening pass and no one said these words, that while we in an organization like this can believe wholeheartedly in volunteerism and have proved it through the past, this cannot be a substitute or an excuse for a government failing to take care of its own," Cronkite said.

A lot of the evening was vintage Buchwald, with assists from author James Michener, Cronkite's daughter Kathy and actress Jennifer Jones, who came from California for the tribute. It was the third annual such affair, which first honored Rosalynn Carter and last year W. Averell Harriman. He and his wife, Pamela, who was honorary cochair, shared the head table with Cronkite and his wife, Betsy, and cochairs Abe and Irene Pollin.

Tracing Cronkite's career, Buchwald told how the newsman had "taken us to China, Russia, the Middle East and even to the Moon. Once, in space, when the astronauts were having trouble with their capsules, Walter was the first to tell them that a malfunction in one of the computers had made the ship lose control in orbit. My wife was sick with fear, but I told her, 'Don't worry, Walter will fix it.'

"Sure enough, 20 minutes later, Walter was back on the air reporting the computer had been fixed and the astronauts were safe. While he refused to take credit for solving the problem, everyone in America knew once again that Walter had saved the day."

Buchwald said that Dan Rather wasn't Cronkite's first choice as a replacement when he turned over the "CBS Evening News." "I can tell you tonight that I was the one Walter wanted to replace him, but CBS interviewed my wife about me and she said, 'He's a nice guy, but he can't be trusted.' "

In introducing Michener, another longtime friend of Cronkite's, Buchwald said Random House had provided him with a "short" autobiography of the author.

"James Michener was born on Feb. 3, 1907, in Mount Vernon, N.Y. Three billion six hundred million years ago, Mount Vernon, N.Y., was 27 miles in from the crust of the Earth . . . As the mountains covering it were eroded away, Mount Vernon, N.Y., would be wrenched, compressed, savaged by cataclysmic forces of various kinds until it finally surfaced through the Earth's crust to become the great city it is today . . . This was the land that produced James Michener."

The audience roared.

At a VIP reception earlier, Cronkite, Michener and Buchwald argued over who violated the covenant they had made a few years ago. In it, they agreed never to show up at testimonial dinners for each other.

Said Buchwald, "We made an exception for mental health because all three of us need it."