Santa Claus or the Sugar Plum Fairy? The way things have developed in this country, it's close to a tossup. The vaunted appeal of "The Nutcracker" ballet as family entertainment for the holidays gives no sign of dimming. Witness the enthusiastic full house for the Washington Ballet's familiar production, which began its annual run at Lisner Auditorium last night. And the company had already performed, last week, six sold-out "Nutcrackers" in Baltimore's Lyric Opera House, accompanied by the Baltimore Symphony.

Such durability has its reasons. There's Tchaikovsky's music, and an endearing story, with its gracious manners, battling mice and a child's dream of Christmas bounty. On the practical side, most "Nutcrackers," including this one, provide stage opportunities for legions of ballet students, who, in turn, give their parents and friends cause for prideful doting. It also doesn't hurt at the box office, a fact not lost on hundreds of American ballet troupes large and small.

Last night's performance reaffirmed the modest virtues that have assured the longevity of the Washington Ballet's version, particularly the homespun warmth of the party scene with its myriad charming details, like the kids who draw on the frosty panes of the Silberhaus home at the start of the ballet.

In addition, guest performances by Patricia Miller and James Canfield as Sugar Plum and her Cavalier lent a highly professional gloss to the Grand Pas de Deux, even though the pair -- former Washington Ballet and Joffrey Ballet principals, now based in Portland, Ore. -- looked far from their best.

In the other major dance roles, as the Snow Prince and Queen, were John Goding and Andrea Dickerson. Goding was in particularly good form, and Dickerson, the most promising of the younger company members, displayed a neat classical line.

There were also a few novel touches this year, including some new costumes. The most significant change, however, was a new Chinese dance for Act 2 by Choo-San Goh, the company's associate director and resident choreographer. Goh has discarded the cutesy artifice of the past and substituted classical steps with Chinese touches both in the arms and in the use of bright streamers waved into airy shapes. As spiritedly danced by Dickerson and Danna Cronin, it was a definite highlight of the divertissements.

It's time, though, for more radical alterations. In its present form the production dates back to 1974, and from both a physical and esthetic standpoint, it's showing its age. The set and the way it's lit are so dark and drab this "Nutcracker" has all it can do to keep from looking glum. And the hybrid nature of the production, all along the spectrum from amateur to professional, no longer suits the kind of company the Washington Ballet has been aspiring to become.

Why doesn't the troupe, for the 10th anniversary it will celebrate next year, commission Goh to create a completely new, rejuvenated "Nutcracker," with a first-class designer for both sets and costumes, and enhanced orchestral accompaniment that won't reduce the music to a squeaky shadow of itself? True, the old version could probably run forever, with minor cosmetics here and there. And a new one would require a capacity for fund raising and promotion, not to speak of artistic resources, the company has yet to demonstrate. But it would sure be the best Christmas present the company could give itself, and it might help restore a sense of progress that now appears to be dwindling.