WHILE MANY COOKS have become intrigued with the nuances of American cooking during the past few years, the food and decorations for most Christmas parties tend to focus on European customs, from red velvet bows tied on pine boughs to English mince pies and French bouche de Noel. That's why drawing from the repertoire of dishes and colorful decorations of the American Southwest can set a party apart. The principal dish can remain the traditional turkey, but how it is prepared and the selection of the side dishes can be as spicy as baskets of red and green chili peppers.

"What people in the Southwest have done -- from Texas all the way to New Mexico -- is adopt and draw from Mexican celebrations and augment them with foods and traditions from the American South," said Anne Lindsay Greer, a Dallas- based food writer and author of Cuisine of the American Southwest (Harper & Row, 1983).

The way to set a southwestern scene is to hang "ristras" -- strings of dried red chili peppers -- on the front door. After the holidays the string can be moved to the kitchen and the peppers can be used during the course of the year.

Many stores in the Washington area stock pi?natas, whimsical clay animals decorated with colorful paper frills. The pi?nata can serve as the centerpiece for a buffet, and is also the after-dinner entertainment for children. There is always an inconspicuous plug on the bottom so the pi?nata can be filled with candy; in Mexico, children then swing sticks at it until it falls and breaks, spilling the goodies on the ground.

Baskets are part of southwestern handicrafts, and using your kitchen cache can create unusual serving pieces. Collect your baskets and then everything from mixing bowls to plastic storage containers. Match them up, cascading colorful napkins over the tops of the sides to conceal any gaps in the fit, or tie the napkins around the handles like a bow.

With a southwestern buffet, the more brilliant colors the better. If you think it would not be a Christmas party without red and green, use the ribbons to tie up napkins of various vivid hues.

The food should be as vivid on the palate as the decorations are to the eyes. Greer said, "Tamales are the traditional Christmas food, and they are used to stuff turkeys in areas like San Antonio where there is a lot of crossover between Mexican and Anglo customs." She gave as an alternative a cornbread and sausage stuffing, or a pecan stuffing, which is more southern but works well with other assertive southwestern flavors.

If you want to construct a menu around simple grilled meats, then serve a jalape?no jelly alongside, and let the side dishes carry out the theme.

A tradition is ensalada noche buena (Christmas Eve salad), which is a colorful m,elange of jicama, beets, oranges, papaya and pine nuts mounded on lettuce leaves and dressed with a simple vinaigrette.

Other options are staying traditional with green and red -- either stuffing your favorite guacamole recipe into hollowed-out cherry tomatoes as hors d'oeuvres or tomato halves as a vegetable, or sprinkling pomegranate seeds on avocado halves with a simple vinegar and oil dressing.

A few cans of chopped green chilies and some grated Monterey Jack cheese will enliven a classic corn pud- ding, and options such as warmed corn tortillas or pumpkin rolls are visually more appealing than dinner rolls.

For a change from wine with dinner, serve a selection of imported Mexican beers. In the border states, a can of beer is served with a slice of lime.

Flan, the classic Spanish custard, is a dessert that can be prepared for a large crowd well in advance. Or, Greer said, another southwestern Christmas tradition is serving hot chocolate (it can be spiked for adults) and bu?nuelos, fried round pastries, for dessert.

"Part of the social custom in Mexico is to break the hot chocolate cups for good luck in the New Year, but I don't think that custom has crossed the border," Greer said. ENSALADA NOCHE BUENA

Serves 4

1 small jicama (found in the specialty vegetable section of supermarkets)

4 fresh beets, cooked and cut into match-stick slices, or a small can of julienne beets

1 fresh ripe mango or papaya

2 oranges

2/3 cup pine nuts

1 tablespoon vegetable oil

Lettuce leaves

THE DRESSING

2 tablespoons cider vinegar

2 tablespoons red wine vinegar

3 tablespoons orange juice

1/2 cup safflower oil

1 teaspoon sugar

1/2 teaspoon salt

1/4 teaspoon cayenne pepper

Peel the jicama, removing both the outer peel and inner fibrous coating, and cut into match-stick slices. Peel the mango or papaya and cut into strips. Peel the oranges, removing all the white membrane. Section and reserve juice needed for dressing.

Saut,e the pine nuts in oil until lightly brown and set aside.

Make the dressing by shaking all the ingredients well in a jar and set aside.

Arrange the salad as follows: Line a deep bowl with the lettuce leaves, then compose the vegetables and fruits in separate rows, sprinkling pine nuts over the top. Pass the dressing separately.

This recipe is adapted from Cuisine of the American Southwest by Anne Lindsay Greer, with permission of the author.