FIRST THE GOOD news: The Kennedy Center has added "Grand Hotel" to its subscription series. The Tony-winning, Tommy Tune-directed musical based on the 1932 MGM movie will arrive Dec. 5 for a run of five, maybe six weeks.

Now, the bad news: The KenCen's current show, "She Always Said, Pablo," a beautiful theatrical whatchamacallit about Pablo Picasso and Gertrude Stein imported from Chicago's Goodman Theatre, will close after Sunday's performance -- two weeks early. Although reviews were good, attendance still wasn't high enough to justify the cost of the remainder of the run. Ticket holders for the cancelled performances can exchange their tickets for seats at the remaining shows or for refunds at the box office. Call 467-4600.

LET'S GET back to the good news: The Studio Theatre has again extended its hit production of Terrence McNally's "Frankie and Johnny in the Clair de Lune," this time through July 29. The show's definitely a good bet for dates, by the way. And the theater is holding a big "garage sale" of props, costumes and furniture July 14 from 10 to 4. Among the items you'll find will be the Infant of Prague costume from "Laughing Wild" and the Buddhas from "Made in Bangkok." Call 332-3300.

THE 10th annual Source Theatre Festival begins this Friday with Peter Donnalley's "Hot Rod Aliens From Hell," in which a bickering yuppie couple discovers an isolated desert cafe and its unsettling inhabitants. The 10:30 p.m. show is preceded by a reception at 10 at the Source (1835 14th St. NW). This year's festival features some 60 new plays performed in a variety of locations, from 10-minute mini masterpieces to full stagings. Call 462-1073.

AND ON A more modest scale, the fledgling Adams-Morgan Theatre Festival continues through Sunday at the District of Columbia Arts Center (2438 18th St. NW) with Bruce Bonafede's "Advice to the Players" and Mary Gail's "Planet of the Mutagens." Call 462-7833.