There's only one reason why the National Theatre of Great Britain's production of "Animal Farm" isn't lending distinction to the two-week Theatre of Nations Festival under way here: This brilliantly realized staging of George Orwell's biting satire is no longer an entry in the festival.

Bowing to protests from the Soviet Union, which does not take kindly to Orwell's tale of a revolution among the quadrupeds, festival officials agreed to drop the show from the lineup. The Soviet Union is a member of the International Theatre Institute, which sponsors the event, and the implication was strong that if "Animal Farm" remained on the bill, several troupes from Eastern European countries might pull out.

Consequently, "Animal Farm" is being presented independently at the Morris A. Mechanic Theatre, while the festival swirls on all around it. On the surface, harmony prevails. Still, it's hard not to view the arrangement as a cowardly compromise that emasculates the purpose of free cultural exchange.

"Animal Farm," ld,10 which runs through Sunday, deserves to be seen, as much for the unflaggingly imaginative direction of Peter Hall as for Orwell's sharp view of the totalitarian impulse in men and pigs. Indeed, it is clear from the start where revolution is going to lead the oppressed animals on Farmer Jones' storybook spread: into even greater oppression. Their high-minded principles of equality for all will be progressively betrayed, rank and privilege will reassert themselves and a manipulative swine named Napoleon will convert the dream of a classless barnyard into the harsh reality of a police state -- patrolled, appropriately, by snarling dogs.

*Orwell's text has the purposeful directness of children's literature; its virulence, in fact, is heightened by its simplicity. What is so entrancing at the Mechanic is the way Hall has turned the fable into a full-fledged theatrical spectacle without sacrificing the illusion of once-upon-a-time innocence. This production is a highly sophisticated blend of Brechtian songs, Japanese theater conventions and Story Theater techniques, and yet it never forsakes the pretense of artlessness.

The musical numbers, in which the animals voice their hopes and disappointments in a brave new world, sound like something out of "Mahagonny." Richard Peaslee's melodies and Adrian Mitchell's lyrics have a defiant edge that is part accusation, part aspiration. And the cast sings them -- hurls them, even -- straight over the footlights. Man, after all, is the enemy.

But if there is something ridiculous about this revolt fated to come to naught -- not to mention cows intoning an anthem -- the cynicism is ours. The creators of "Animal Farm" retain their childlike belief in the tale, even when the pigs have run amok and begun to behave suspiciously like pasty-faced dictators at a banquet table.

Jennifer Carey's pop-up and fold-out sets have the charm of a three-dimensional coloring book. The masks and costumes she has devised for the cast would surely cause a sensation at a Mardi Gras ball, but, more to the point, they wouldn't be out of place in a nursery school play. Not the least of her triumphs is giving each actor an additional set of legs. Take, for example, Graham Sinclair, who plays Boxer, the horse. He stands on modified stilts and holds in his hands two long canes that terminate in hooves. Ambling across the stage, he captures more than the plodding gait of a faithful nag, heading off to forced labor; he masterfully reproduces the clippety-clop, as well.

The chickens are another story. The actors playing them wear chicken-shaped bonnets that are animated by the performers' natural head movements. I daresay you'll be completely taken in by the flutter and cackle. (When the hens rebel against the increasingly autocratic regime, that very flutter becomes a commentary on the futility of spontaneous uprisings.) Woolly collars and pointy ears help the sheep look the part and you'll notice that they slip little bahs into their lines, whenever a word beginning with 'b' presents itself. This is the most persuasive transformation of men into beasts since "Cats."

Of course, it takes more than just astute costuming to pull off the trick. It takes actors. And in that the National Theatre of Great Britain is blessed. Portraying animal types of minimal complexity, the large cast delivers performances that are simple, but never simple-minded, illustrative without being Disney cute. Some of these creatures are stupid; others are vain. And the sheep follow mindlessly. Keeping easy anthropomorphism in check, Hall nonetheless sees to it that they all have a human reality.

Naturally, the pigs get the showiest parts -- double-dealers that they are. As Napoleon, Barrie Rutter starts out all sweet and cuddly and ends up a screaming tyrant. Even his eyes seem to shrink in the process to black beads. It's an impressive and chilling escalation in brute ambition that reaches its pinnacle when he and his porcine cohorts put on vulgar clothes, rear up on their hind legs and reel about as the very humans they once despised.

John Normington squirms and fawns and prevaricates ignobly as Squealer, Napoleon's front man and apologist. (If a pig were a weasel, it would look like this.) And since not all hogs are villainous, although they are frequently misguided, George Costigan contributes a savory interpretation of Snowball, the intellectual theoretician whose generous thinking governs the revolution until baser motives take over.

If the Theatre of Nations chooses to disown this "Animal Farm," that is the festival's loss. As a demonstration of sheer theatrical expertise, it is a first-rate undertaking, filled with spirit and invention. Orwell's satire of the ruthless ways of dictatorial regimes may rankle some. But excluding it from the festival merely proves that on more than one count, Orwell continues to be right. movieag Animal Farm, By George Orwell. Adapted by Peter Hall. Lyrics by Adrian Mitchell; music by Richard Peaslee. Directed by Peter Hall. Sets, costumes and masks by Jennifer Carey; lighting, John Bury. With Pamela Buchner, George Costigan, Liz Crowther, Kenny Ireland, John Normington, Barrie Rutter, Graham Sinclair, Elaine Lordan, Mike Hayward. At the Morris A. Mechanic Theatre in Baltimore through Sunday.