SQUID HAS A severe image problem. No matter that it is one of our most plentiful, nutritious and adaptable seafoods. It is not lovely to look at--and certainly not to hold.

"Many people's first reaction is 'Oh, my god--slimy tentacles!' says Dan Hallanan, owner of Squid's, a San Francisco restaurant specializing in the much-maligned mollusk. "After they get over their initial queasiness, most people seem to enjoy it, though."

Hallanan opened the imaginative, New Wave-tinged restaurant six months ago with his wife Wendy and sister-in-law Penelope in the city's rather seedy "Tenderloin" district. After a slow start, Squid's squid is getting a firm grip on the consciousness of food-loving San Franciscans. People have been known to come in and order full three-course squid meals, Hallanan says.

"You can usually spot the first-timers," he says. "Their partner will be happily putting away a plate of squid and he or she is sitting there trying bravely to get it down. A lot of our people are New Wave types, middle-aged families and businessmen."

Hallanan started Squid's as a lunchroom, then expanded the hours and the menu as its popularity grew. "We're even on the same block as St. Anthony's Dining Room a soup kitchen , so it's kind of a risk. We were encouraged, because on the other side of the Tenderloin a few other restaurants were starting to grow. It's already started to upgrade the area. Besides, I think that sort of outre' image adds to the appeal of the whole thing."

The new stripped-down Art Deco environment includes pink and black walls, a neon squid in the front window, horseshoe-shaped bar, a rambunctious jukebox, punked-out waiters and an eclectic clientele. "The squid is pink and it has black ink, and the colors fit real well into the New Wave thing," Hallanan says.

Squid's pink and black menu features seven squid dishes--including Cioppino Lagomarsino (a calamari, fish and shellfish soup) and a squid-and-herb salad--all of which range from $5 to $7.50. It also offers a selection of nonsquid seafood, salads and sandwiches for the squeamish. Hallanan says the biggest sellers include the squid Elena (saute'ed squid), platters of fried squid rings, grilled squid, and the Frangione, a squid and sausage sandwich.

"Wendy conceived the Frangione in a dream," Hallanan says. "She woke up one night and said, 'My God! Squid pizza!' And the name is totally mythical. Means absolutely nothing."

"Wendy and I liked squid ourselves," Hallanan adds, explaining his rather unusual choice for a restaurant specialty. It's their second restaurant--the first, Augusta's, in the East Bay, is a thriving pasta and seafood house, now run by Hallanan's mother-in law. It was there they discovered the versatility of squid.

"We like its flavor, and the way you could work with it. It's a very neutral-tasting food--it can take on the qualities of whatever you are preparing it with."

And it is a low-calorie, high-protein food source. A 6-ounce serving of squid yields 30 grams of protein, 2.5 grams of fat, 2.9 grams of carbohydrate, at 153 calories.

Another plus on squid's side is that almost all portions of it are edible. "You get an excellent return on the product--you only lose about 25 percent of the animal when you clean it," Hallanan says. A whole squid turns out about 12 ounces of cooked squid. And those "slimy tentacles" are edible, delicious in fact.

According to Hallanan, almost all the world's squid supply is caught in California. Monterey Bay produces 50 to 60 percent of the world's squid, he claims. Of that, 95 percent is shipped to Europe and Japan. Most of the rest is used as bait for tuna and salmon and other big carnivorous fish. "It's just never been eaten in any quantity in this country," Hallanan says. "It's partly a cultural thing. It's generally eaten by Mediterranean people, Italians, Asians, people in San Francisco's North Beach. Most of white America has never heard of it." Hallanan says he buys about 1,500 pounds of squid a week, and uses about 240 pounds a day.

Adding to squid's image problem is the widespread belief that it is a tough and leathery food when cooked.

"Most people, including many restaurants that serve it, don't know how to cook squid properly," Hallanan says. "It doesn't have to be tough. It actually has a wonderful, chewy texture."

"After 60 seconds of heat, squid sort of 'sets up,' gets a rubbery, tough texture. So our fried squid is fried for only 30 seconds. We don't cook anything over a minute."

Hallanan's cooking secret: fresh squid and no heavy batters. "When we fry the squid, we put nothing on it but flour. Most recipes call for breading the squid or any number of things.

"Because squid is so changeable, all wines go well with it," Hallanan says. "Fried squid is like fried chicken or fish, so you'd serve a white wine; most of our customers order that. For the Elena or the spiced squids, serve a red wine."

Many more people would probably eat squid if it were not so unpleasant to clean, Hallanan says. "It is definitely slimy stuff. Most of our people hate cleaning it. When we first opened, one of the dishwashers would clean it, but now we have a fulltime person who does nothing but clean squid eight hours a day. Definitely a job nobody wants to do."

An easy, relatively clean way to clean squid at home: Cut off the tentacles just below the eye and save them. Squeeze out the beak, and discard. Hold the blade of a large knife almost flat against the body of the squid and scrape from tail to open end of the body cavity. This squeezes out the entrails, which should be disposed of. Flip squid and repeat scraping. Remove any remaining innards with a spoon. Stab transparent quill with a knife, pull body away. Quill should remain under knife. Discard. Since the squid's body is a tube, rings can be made by cutting across the body.

Now that his restaurant is in the black (and pink), Hallanan hopes to expand his squid empire. "In our most daring and boldest plans we'd like to open an American Squid's in Paris. We're also thinking about starting something on the East Coast, either in New York or Washington." CALAMARI SALAD (4 servings) 4 pounds Monterey squid, cleaned and cut into 1/2-inch rings 1 green pepper, sliced 1 red pepper, sliced 2 medium red onions, sliced 1/4 bunch cilantro (coriander) leaves, coarsely chopped 1/4 cup fresh basil, coarsely chopped (substitute 1 tablespoon dried basil) 1 teaspoon crushed red pepper flakes 3 cloves garlic, crushed 1/2 ounce ginger, finely grated 4 tablespoons fresh lemon juice 1/2 cup olive oil 4 tablespoons Thai hot sauce (available at oriental markets), or substitute 1 teaspoon hot pepper sauce Salt and white pepper

Garnish: lemon wedges, black olives, red leaf lettuce, tomato wedges, chopped parsley

Poach squid in a small basket in simmering water for about 2 or 3 minutes. Squid is done when opaque and ends begin to curl. Run cold water over squid. It should be tender and slightly chewy, but not tough. Cool. Add sliced vegetables, herbs, garlic and ginger, and toss. Mix together: lemon juice, oil, hot sauce and pour over salad. Add salt and pepper to taste. Serve on bed of lettuce and garnish. CALAMARI ELENA (4 servings) Olive oil for saute'ing 4 garlic cloves, crushed 1 shallot, finely diced 1 teaspoon crushed red pepper flakes 1 green pepper, sliced 2 medium onions, sliced 4 ounces mushrooms, sliced 1/2 bunch scallions, cut into 2-inch pieces 1/2 cup dry white wine 4 pounds Monterey squid, cleaned and cut into 1/2-inch rings 1 large tomato, cut in 8 wedges 3 cups marinara sauce (recipe below) Salt and black pepper Chopped parsley Lemon wedges

In 12-inch saute' pan, heat oil. Add garlic, shallots and red pepper and saute' about 30 seconds, making sure it doesn't burn. Add green pepper, onions, mushrooms, scallions and wine; saute' till onions are slightly soft, about 1 minute. Add squid and tomatoes and continue to cook, stirring, for 1 minute. Add sauce, salt and pepper and simmer approximately 2 minutes--or longer if the marinara sauce is cold--until squid is opaque and begins to curl. Serve in soup bowls and garnish with chopped parsley and lemon wedges. MARINARA SAUCE (Makes 1 quart) 2 medium onions, diced 3 tablespoons olive oil 4 cloves garlic, crushed 1 teaspoon marjoram, crushed 1 teaspoon oregano, crushed 1 teaspoon basil, crushed 1 tablespoon crushed red pepper flakes Salt and black pepper to taste 2 15-ounce cans tomatoes in pure'e

On medium heat, saute' onions in oil until translucent, about 2 minutes. Add garlic and saute' for 2 minutes. Add herbs and salt and pepper and toss. Add tomatoes and pure'e, and simmer on low heat 30 minutes. FRANGIONE (3 servings) 1/2 pound Monterey squid 1 french baguette Marinara sauce (recipe above) 6 2-ounce slices jack cheese 1/2 pound cooked Italian sausage, crumbled Clean squid and cut into 1/2-inch rings. Split baguette and cut into thirds crosswise, spread marinara sauce thinly over each slice. Place cheese on top. Then top with crumbled sausage and squid rings. Bake at 350 degrees for 8 to 10 minutes or until cheese is melted and squid is opaque. May be served open-faced or closed.