WHEN REGGAE artists sign on with big labels, their music is often watered down, smoothed out and otherwise made palatable for the finicky American consumer. Americans don't like their reggae too musically raw or spiritually militant, or so the label execs tell each other, the result being that what we get instead--from Dennis Brown to Jah Malla to Third World--is not reggae at all, but some dime-store approximation with a disco-pop shellac.

Steel Pulse's first American-label album, "True Democracy" (Elektra E1-60113) is a happy departure from this syndrome. The group maintains its artistic integrity with a minimum of concessions, and while the record is not as heady as Black Uhuru's recent triumph, it's a big step in the right direction. The group performs tonight at the Pension Building.

"True Democracy," despite its weighty dedication to Bob Marley, the victims of last summer's London riots and the murdered children of Atlanta, is a cheerful album, almost buoyant in its musical exhortations to dance even as its lyrics tackle less-than-merry topics. "Ravers," with its snappy tempo and winking choruses urging us to get "woops outside your head," is accessible without being cloying. Similarly, on "Chant a Psalm," "Worth His Weight in Gold" and "Your House," songwriters David Hinds and Phonso Martin use a light touch on the inevitable subjects of religion and repatriation, turning them into upbeat personal statements rather than solipsistic imperatives.

But Steel Pulse has always been best when a shade of anger slips through the tracks. The strongest cuts on "True Democracy" are the least compromising musically, the most intense thematically. "A Who Responsible" is an unflinching confrontation with impending Armageddon, made slightly sinister by Stepper McQueen's insistent bass line and Bumbo Brown's urgent vocals.

"Blues Dance Raid" is more personal, and therefore even tougher, although it never quite approximates the ominously vengeful overtones of Linton Kwesi Johnson's "Street 66." Here, a Rasta party is broken up by the police armed with a "search warrant for their outvitation," and though there's a chorus of "Dreadlocks cry blood," it's the litany of the cops' petty crimes at the end of the song that conjures up the antagonism of the situation: Come a move out I soft drink Come a rough up the people Come a turn off me system Come a smash I turntables Come a scratch up I music Come a drive up you meat van.

Unfortunately, Steel Pulse loses its emotional intensity the minute it gets didactic, which it does in "Man No Sober" and "Leggo Beast." The former is a droll observation of a day in the life of a tippler, and its humor and rubber-legged gait save it from preachiness. "Leggo Beast" is a variation on Bob Marley's "Pimper's Paradise," a specious damnation of unchaste women that seems silly and self-righteous under the glare of the album's other tracks.

Still, "True Democracy" has enough authentic emotion to keep its reggae spirit intact. Such is not the case with "Reggae Sunsplash '81" (Elektra E1-60035 G), a compilation of acts at last year's Jamaican music festival that also doubles as a soundtrack for the movie of the same name.

"Sunsplash" is a curious disappointment. Curious because its producers painstakingly etched out the very effects that make a live album come to life. Disappointing because some of the lesser reggae acts are highlighted at the expense of more deserving talents. Nobody wants to listen to endless fade-outs of applause and crowd noise, but the most minimal indications of Sunsplash's audience are whisked away in favor of dead space, giving the record a sleepy, awkward pace. Where would the Woodstock tracks be without Wavy Gravy's inspired message-reading?

There are some fine moments on "Sunsplash," most predictably Black Uhuru's extended "Plastic Smile/Guess Who's Coming to Dinner" segue. And Steel Pulse gets the album off to a fine start with a rub-a-dub "Sound System," "Handsworth Revolution" and "Smile Jamaica," the last a bittersweet tribute to Marley.

The tracks to avoid are the Melody Makers' overlong and lecherous "Sugar Pie" (3 1/2 minutes of little boys strutting and posturing) and Eek-A-Mouse's sub-dub "Wa Do Dem," a vehicle for self-serving Rasta rhetoric and little else. Rita Marley appears with the I-Threes, or so the back cover claims. But it's hard to find her voice in the muddy rendition of "Them Bellyfull," and she's certainly not showcased elsewhere on the album. Side 2 is dispensible, and Side 3 comes dangerously close before being saved by Third World's definitive and determined "1865" and "Rock the World," the latter giving the lie to the record's general lethargy.