LONDON, JAN. 17 -- Winner of Whitbread's $36,000 prize for 1988's best British novel-with 40,000 copies of the bestseller sold in Britain alone-Salman Rushdie scarcely needed the publicity that has come his way in the past few days. But the book's two allegedly blasphemous dream sequences and the 550-page novel's title proved enough to get "Satanic Verses" set alight in a ritual book burning in Bradford last Saturday, at an angry demonstration organized by leaders of that West Yorkshire city's large Moslem population. The book burning-and subsequent events-have focused Establishment attention on the more intolerant side of sections of Britain's 2 million-strong Moslem community, often praised for its hard work, close family ties and law-abiding nature. ("Satanic Verses" has just been published in the United States.) Prominently displayed photographs of the book in flames were part of extensive media coverage of the decision by W H Smith, Britain's biggest bookselling chain, to withdraw "Satanic Verses" from two Bradford shops on the advice of police who took threats to Smith's staff and property seriously. Banned in Pakistan, Saudi Arabia and Rushdie's native India soon after it was published here last September, "Satanic Verses" had prompted only limited attention among the general public despite earlier demonstrations organized here by radical Islamic fundamentalist groups demanding its withdrawal. The plot revolves around an Indian movie star and a British television personality, both of whom are flying from India to London aboard a 747 that explodes after a bomb is planted on board. Both are presumed dead, but in fact they survive-or are reborn. "People in the Islamic world will go to great lengths to prevent free expression and prefer burning books to reading them," Rushdie said in a telephone interview. "But the image of book-burning in Britain in 1989 horrified lots of people who are disturbed by this central iconic image of barbarism. "Although the campaign had been going on for several months," he added, "this simple image of a burning book finally alerted people in this country to something extremely dangerous and ugly, even people who cannot stand me as a writer." The controversial title and dream sequences turn on two verses that the prophet Mohammed is said to have removed from the Koran, believing they had been inspired by Satan masquerading as the angel Gabriel. W H Smith's initial announcement that the book was being withdrawn from shops because of allegedly waning sales-rather than because of threats-only made matters worse. Editorials in establishment newspapers castigated both religious intolerance and W H Smith's decisions. And today Smith's chairman, Sir Simon Hornby, announced that "Satanic Verses" was back on sale in Bradford-apparently under the counter rather than visible on shelves-and still on display in the chain's 428 other shops despite earlier suggestions it was being withdrawn "for purely commercial reasons." Rushdie disputed Smith's sales figures, noting that the novel had risen from ninth to sixth place on a major bestseller list and gone into an eighth reprint in the week preceding the book burning. The author, 41 and a British citizen, said it was "possible" that the book burning will spur sales and recalled that the British government ban on "Spycatcher," the memoirs of former intelligence officer Peter Wright, was a classic example. He charged that "a very carefully orchestrated campaign is being run by a number of extremists centered on the Regents Park mosque" in London thanks to "considerable Saudi and Iranian funding." He said he and his American publisher, Viking, had received "fairly extreme threats" from people "who had not bothered to read the book." He expected similar pressures in the United States and said, "Viking has taken precautions," which he declined to spell out. Asked if he had expected the novel to provoke such turmoil, he said, "It is a fairly radical critique of Islam seen from a secular humanistic point of view. "I expected those with absolute literalist views would dissent strongly from what I had written. I was not writing to please the mullahs of Pakistan, Saudi Arabia, Iran, Britain or the U.S., and I knew I was breaking long-enshrined taboos. "But I did not anticipate the size, nature and ugliness of the protest." He said that "rather sadly, the whole debate had centered on a very small part of the novel," whose main theme is the "migration from one culture to another and the metamorphoses and hybridization that result. "Unlike American migration, of basically coming from the old to a new world," the novel describes his own experience of being born a Moslem and living in India until he was 14, then "coming from one old world to another old world" in Britain, which "created a different set of accommodations and resentments."