It was a curious year in the theater -- big and little at the same time. At one end of the spectrum was the teeming "Cyrano de Bergerac," which the Royal Shakespeare Company brought to the Kennedy Center. At the other end, monologuist Spalding Gray, seated behind a desk at the New Playwrights' Theatre, talking about his life and dreams.

The economic pincers continued to tighten, but several of our theater companies still managed to go over the top. Others nearly went under. Profligacy and penury were the year's dual themes.

The thrust toward epic grandeur came on several fronts at once -- at the Kennedy Center's American National Theater, which was fueled by the unbridled imagination and seemingly inexhaustible energy of Peter Sellars; and at an expanded Arena Stage, which, spurred by a grant from the National Endowment for the Arts, doubled the size of its resident acting company.

ANT went splat with its inaugural production, a soporific "Henry IV, Part I," but subsequently recouped with Sellars' haunting staging of "The Count of Monte Cristo." Sellars opened up the Eisenhower stage to its full height and depth and filled it with audacious images, thereby dramatically rehabilitating what was, in essence, a rattling old melodrama. It was followed by a beautifully burnished revival of O'Neill's marathon "The Iceman Cometh" and then "A Seagull," which housed some bold, if not particularly Chekhovian effects, including a laser show.

Meanwhile, Arena was up to spectacles of its own -- none more amazing than "Tartuffe," my candidate for the year's best production. Director Lucian Pintilie stretched the classic comedy radically. At the end, rubble rained from the skies, as Tartuffe's perfidy literally brought down the house. But Pintilie remained scrupulously faithful to the play's spirit -- something Sellars cannot always claim. "Man and Superman" trotted gleefully over hill and dale, with a stop in hell, while "Execution of Justice" unfurled a huge tapestry of social dislocation and agony, spawned by the Dan White murder trial. Bigger still was John Guare's "Women and Water," which wanted to show us no less than mutiny on the high seas and the awful carnage of the Civil War. The play was a disappointment, but its sprawling ambitions were heady.

Even the two best touring musicals this past year -- "La Cage aux Folles" at the National; "My One and Only" at the Opera House -- seemed fuller than the usual whittled-down road companies that Broadway has taken to sending on the road. The thinking seems to be that if you're going to ask people to pay hefty prices, you darn well better give them something to look at for their money. The costumes for "La Cage" alone could have serviced half a dozen fancy-dress balls.

After years of shrinkage -- ever-smaller casts in plays that barely fill the confines of a single set -- there is a movement afoot in some quarters to recapture the flamboyance, scope and rip-roaring passions that used to be part of the thrill of theater-going. Both "The Count of Monte Cristo" and "Women and Water," for example, were attempts to exonerate the towering, headlong dramaturgy of the 19th century. In the process, they borrowed some of the cinema's tools -- wipes, dissolves, fade-outs -- that further emphasized the sense of sweep. Too much of our contemporary theater asks us merely to eavesdrop. Here, directors and actors were emphasizing everything that is bold and brazen and disproportionate in the theatrical experience -- a development as heartening as it is, obviously, costly.

Indeed, as if to remind us that the costs of doing theater are near-prohibitive, the Folger Shakespeare Library announced in January that it would close down its resident company, the Folger Theatre, claiming that mounting deficits jeopardized the library's own future. A huge hue and cry ensued, the library backed down and a compromise was eventually struck. The Folger Theatre -- recently rebaptized the Shakespeare Theatre at the Folger -- was given a two-year lease on life, during which time it is to reconstitute itself as an independent financial entity. The crisis was all the more distressing because it was not an isolated instance. Sink or swim -- in the theater, at least -- has become a question of sink or subsidy.

The New Playwrights' Theatre also sent up an SOS in January, saying that it would have to fold unless it could raise $250,000 in three months. The drive took considerably longer -- until December -- but at the year's end, the theater was able to announce four plays for 1986 and the outlook was guardedly optimistic. Source Theatre, however, lost one of the three spaces that made up its complex on 14th Street NW.

Cutting back, of course, is no solution to the problem -- merely the first concession to defeat. Knowing this, many of our struggling theaters found themselves in that paradoxical bind: How do you grow artistically during a time of economic cutbacks? The Studio Theatre momentarily took the lead by negotiating a small-theater contract with Actors Equity, which permits a limited number of union performers to appear in its shows. One of the first to be hired was 81-year-old Katherine Squires, whose presence in "A Walk Out of Water" made an immediate difference in the fortunes of a play still searching for its shape. The Woolly Mammoth Theatre Company spent the last half of the year scouting for new -- and, hopefully, permanent -- quarters.

The appointment of David Bell as artistic director of Ford's Theatre seemed to augur well, until the curtain went up on his first two productions -- treacly revivals of "Godspell" and "Little Me" that made "Up With People" look racy by comparison. On the other hand, the Round House's new artistic director, Jerry Whiddon, arrested the decline of that youthful company and made the theater once again a place of promise with a fiery drama, "Fool for Love," and a playful fable, "The Man Who Killed the Buddha."

If you were searching for laughs, you found them aplenty in Larry Shue's "The Foreigner" at Olney Theatre, along with a pleasant sense of vindication. The play had not only survived tepid off-Broadway notices, but suddenly, it seemed, everyone was clamoring for the rights. The Cinderella story turned dark, however, when Shue, who had spent his formative years at the Harlequin Dinner Theatre in Rockville, was killed in a plane crash in the Shenandoah Mountains.

The year's most daring new comedy was "Tent Meeting" at the Terrace, which took on the moral righteousness of the fundamentalists and imagined the reincarnated Baby Jesus as a turnip in a picnic hamper. "Brighton Beach Memoirs" at the National found Neil Simon remembering his childhood with warm nostalgia. There was odd, eccentric humor in Horizons' "Last Days at the Dixie Girl Cafe," while the New Arts Theatre's "Summit Conference," which imagined the mistresses of Mussolini and Hitler coming together for tea, bristled with some fairly invigorating bitchery.

The theatrical event with the most far-reaching implications, however, was the festival of Chicago theater, which Sellars managed to engineer at the Kennedy Center with generous support from AT&T. Grandly billed as the AT&T Performing Arts Festival at the Kennedy Center, it consisted of four plays, performed by two of the Windy City's more prominent companies, Wisdom Bridge and Steppenwolf. Two of the productions were even presented for free in a large hall on the center's top floor that Sellars was calling, logically enough, the Free Theater. The fare -- "Kabuki Medea," "Coyote Ugly," "Streamers" and a brutal "In the Belly of the Beast" -- was nothing if not visceral.

But more than so much gutsiness under one roof, what made the festival intoxicating was the kind of cross-pollination it permitted. People have long dreamed of the prospect of regional theater productions shuttling from city to city, especially since the supply of touring Broadway hits has dwindled to a handful. The Chicago festival was the most encouraging expression of that dream to date.

The year also saw the first Helen Hayes awards, established to do for Washington theater what the Tony awards do for Broadway. The inaugural presentation was decidedly schizophrenic; half of it was relaxed and home-towny, the other half foolishly bent on wowing the crowd with ersatz show-business glamor. Halo Wines took home the first best actress award for her performance in Arena's "Cloud Nine," and looked to be a strong contender this year for her harrowing portrayal of the suicidal daughter in " 'night, Mother."

Among the other notable performances: Jason Robards, who made Hickey into death's recruiting officer in "The Iceman Cometh"; Patrick Richwood, as the irresistibly lovable dimwit in "The Foreigner"; Zoe Caldwell, who gave an elegantly disciplined portrayal of "Lillian" (as in Hellman); Keene Curtis, better as the outrageous Zaza in "La Cage aux Folles" than George Hearn, who created the role on Broadway; Derek Jacobi, a masterful Cyrano; and, frankly, just about everyone in "Tartuffe," although Isabell Monk was particularly sassy as the maid.

For extravagance beyond any call of duty, the board of the nonprofit National Theatre Corp. took the cake. Largely because of astute booking policies by the Shubert Organization, which provided the theater with some blockbuster shows, the coffers were running over. Capitalizing on the theater's high profile -- and perhaps overcompensating for all the years of playing second fiddle to the Kennedy Center -- the board brought out a lavish coffee-table book to celebrate the National's 150th birthday, and then commissioned a $250,000 movie, which is intended to take the clapping to the local airwaves.

To sober-minded onlookers, it seemed a frivolous waste of the National's prosperity and clout. Although now in a position to make grants to the smaller theaters in town -- a gesture that would truly count -- the National's board seemed to prefer to throw one glittery party after the next. (The 150th birthday has already been feted on four occasions, with a fifth in the offing.) The much-vaunted public service programs were a long time coming, and not of especially high quality once they started up.

But that, too, was characteristic of the contrasts that marked the year as a whole. Trunk-loads of costumes helped account for the centuries-old splendor of the Grand Kabuki of Japan at the Opera House, while that inspired clown, Bill Irwin, demonstrated at the Kreeger how inventive he can be with an empty trunk. A laser show here and a spotlight fashioned out of a tin can there. Orchestra seats for $40 at the National and bleacher seats for nothing at the Free Theater.

Wherever you looked, the theater was letting out all the stops or else it was pulling in its belt. Going for broke and going broke, at the same time