NIAGARA-ON-THE-LAKE, CANADA -- The remark was uttered in jest, but only partially, and it had its truth. Speaking about Canadian theater to a gathering of American critics, Christopher Newton, who acts as artistic director of the Shaw Festival in this tiny, postcard-perfect town, observed dryly, "We isolate great theater, rather like TB sanitariums in the 19th century."

He was not referring just to the Shaw Festival, now in its 25th season, but also to the Stratford Festival, which 35 years ago rescued the blue-collar town of Stratford from economic decline and established it as one of the shrines of theatergoing in North America. A two-hour drive separates the two institutions, as does the metropolitan splendor of Toronto. But for those who think of theater primarily as an urban endeavor, both festivals foster the distinct impression of being in the middle of nowhere.

Their very picturesqueness, of course, is a large part of their allure. Last year, of the 276,000 spectators the Shaw Festival attracted, not quite a third came from south of the border; 36 percent of the 426,000 who turned up at the Stratford Festival were Americans. Taking into account the additional revenue that is spent in hotels, restaurants and shops -- not to mention on T-shirts emblazoned with Hamlet's likeness and Shakespearean buttons proclaiming "Will Power" -- the festivals stack up as major tourist attractions. Newton's claim notwithstanding, however, great art has always been somewhat more elusive than great scenery.

The Stratford Festival, now under the stewardship of John Neville, has certainly experienced its moments of high glory in the past, when the likes of Maggie Smith, Christopher Plummer, Hume Cronyn, Jessica Tandy and Zoe Caldwell appeared on its various stages. But it has also known its slumps, internal warfare, and in 1983 and '84 life-threatening deficits that have only recently been whittled back to manageable proportions.

The Bard is habitually served with a flourish; "Othello," opening July 29 with American actor Howard Rollins in the title role, is this summer's trump card. But Ibsen, Chekhov, Sheridan and Brecht are also on the bill, as is "Cabaret," which will get more performances (69) than any other production -- a sign that increasingly the mass audience has its prerogatives here, too.

At the Shaw Festival, the works of George Bernard Shaw and his contemporaries constitute the fare -- which is not so restrictive a mandate as it might seem, considering that Shaw lived from 1856 to 1950. No one says so outright (or at least not for attribution), but the festival tends to be regarded by some as a lightweight, or, as one Canadian director put it, "a Shaw theme park" trading in prettiness and summer pleasantries. Its season invariably includes a musical ("Anything Goes"), a murder mystery ("Not in the Book") and a frivolous comedy or two ("Hay Fever," "Peter Pan").

Stratford has the numbers on its side (86 actors, an overall budget of $14.6 million) and the imposing international reputation. But the Shaw Festival has the charm -- dollops of it. Between the two, there is more than enough to tempt the theatergoer to stick around for a few days: a repertory of 14 plays in 26 weeks at Stratford, 10 plays over a 27-week season at Niagara-on-the-Lake.

Both institutions pride themselves on appearances that take the form of immaculate lawns, well-groomed flower beds and a general air of civility. If the Stratford Festival can lay claim to dozens of graceful swans towing their cygnets across the waters of the Avon River, the Shaw Festival recently adopted two falcons, which are being encouraged to nest and propagate on the theater roof. Officials hope to install a closed-circuit television system soon so spectators can observe the birds, an endangered species, before and after the show.

The marriage of culture and bucolic delights is not fortuitous. An estimated 60 million tourists travel between Toronto and Niagara Falls each year, and getting more of them to go the extra kilometers to either Stratford or Niagara-on-the-Lake is as much a priority of the Ontario government as it is of the festivals themselves. Whatever else Shakespeare and Shaw may be, they are bread and butter.

When Hollywood went looking for the ideal New England village to serve as the setting for Stephen King's "The Dead Zone," it understandably picked Niagara-on-the-Lake (population 3,600). Not every house is white and not every garden has a profusion of flowering rosebushes -- it just seems that way. The main thoroughfare boasts an array of quaint shops (peddling things to eat, wear or gather dust back home on the knickknack shelf), a five-star Victorian hotel (the Prince of Wales) and, at the center of it all, a stone courthouse and brick clock tower.

The Shaw Festival was launched in 1962, when part of that courthouse was converted into a small theater for eight weekend performances of "Don Juan in Hell" and "Candida." It didn't really come into its own, however, until 1973 with the unveiling of the 863-seat Festival Theatre there, where the edge of town starts giving way to gentle farmland and tidy vineyards. The courthouse is still pressed into use, as is the town's only movie house, the Royal George, for less commercial productions and lunchtime fare. But the brick and glass Festival Theatre is the major platform for the 70-member acting company.

"Major Barbara" is the prime Shaw offering this season, in an opulent production directed by Newton. Indeed, Lady Undershaft's manse is worthy of a Byzantine potentate, and even the Salvation Army headquarters, where Major Barbara (Martha Burns) ministers to the destitute, evokes all the epic squalor of the Industrial Revolution. Newton has a reverence for Shaw, and the production is exceedingly well spoken and carefully argued. On the other hand, it honors Shaw's intellect more than his passion, and the play's ongoing debate over the best way to save men's souls makes for fairly bloodless going.

It was Shaw's contention that poverty is the greatest sin, and that humanity's material needs must be met before its spiritual concerns can be addressed. Ironically, the spokesman for that belief is Major Barbara's own father, Andrew Undershaft, who has earned billions manufacturing munitions to blow up the world but whose workers live in a state of contentedness and material comfort. Douglas Rain plays Undershaft with far more assurance and suaveness than is habitually the case, which is both this production's strength and its weakness.

By making Undershaft less loutish and bullying, Rain discovers in the man a dignity and a reasonableness I've not seen before. At the same time, it is abundantly clear from his first appearance that his views are going to carry the day. As a result, the turmoil in Major Barbara's heart tends to take a back seat.

Noel Coward's "Hay Fever" is given a breezy enough production that appeared to enchant the ladies in flowered dresses and the gentlemen in pastel slacks who made up most of the audience at the matinee I caught. For anyone who remembers the recent Broadway revival starring Rosemary Harris, the Shaw Festival's interpretation is apt to smack a bit of summer stock, however. The chronicle of a weekend in the country, during which the assorted members of the histrionic Bliss family treat their guests alternately as supernumeraries and pariahs, the play is as delicate (and iridescent) as a soap bubble. Blow too hard, as director Denise Coffey sometimes does, and it pops.

Far more interesting to my mind -- and the most vivid of the three Shaw Festival shows I saw -- was "Marathon 33," June Havoc's account of her experiences in the grueling dance contests of Depression America. The production confirms the suspicions raised in Washington by Horizons Theatre, which revived the work earlier this spring: As a play, "Marathon 33" is a complete muddle.

However, as a documentary about a particularly aberrant form of show business in the 1930s -- and by extension, as a metaphor for a bankrupt society that believes "sadism is sexy and masochism is talent" -- the show can have a gritty immediacy. With a cast of more than 30, plus a five-piece onstage orchestra, the Canadian production assumes near-spectacular proportions. It begins in darkness with the howling of the winds that turned America's croplands into dust bowls. Then the lights come up to reveal a deserted, two-story arena, in which the dust hangs in the air like tattered curtains.

Little by little, director Duncan McIntosh animates the scene, as promoters, contestants, musicians and voyeurs make their way into this palace of the damned.

Camille Mitchell plays the Havoc character, a former child vaudeville star who reluctantly enters the contest, endures months of nonstop agony on the dance floor, but presumably emerges from the ordeal a woman. Hers is a gutsy, gallant performance, although it never quite touches the heart.

The fault, I think, is the play's. Its authenticity lies rather in the overall spectacle of desperate men and women, who have been forced to eat, sleep, dance, copulate, fight and, above all, suffer in public for the delectation of the crowd.

It's exhausting work -- and not just for the performers. In "Marathon 33" the gladitorial impulse reaches its nadir.

Nothing I saw at the Stratford Festival was quite so raw, although its production of "Troilus and Cressida," vitriolically dismissed by the Canadian press, was said to introduce the spirit of "rough trade" to Shakespeare's rarely performed tragedy. (Even cab drivers in Stratford were warning their passengers to stay away from this one.) I ended up, instead, at a handsome if conventional production of Richard Brinsley Sheridan's "A School for Scandal," which was rather like being trapped in a tasteful gift shop for three hours.

The antithesis of Niagara-on-the-Lake, Stratford (population 26,000) is a working-class city that functions as a farming community, a center of light manufacturing and a theatrical mecca. Its split personality is duly noted on the sign at the city limits, welcoming you to Stratford, "Home of the Stratford Festival and the Pork Belly Congress." Most of the red brick homes are undistinguished, and yard sales, unthinkable at pristine Niagara-on-the-Lake, are common.

If the region has acquired its share of trendy restaurants, the downtown area remains largely utilitarian in character and, excepting a flag-decked City Hall, no more photogenic than, say, Toledo. The steam engines of the Canadian National Railroad used to be repaired and serviced here, but when diesels took over after World War II the local economy began a dangerous downward spiral.

It probably would have continued had not a local journalist, Tom Patterson, hatched the idea of launching the Stratford Festival. In the summer of 1953, a huge circus tent was erected on a grassy slope in Queen's Park to house the festival's first production: "Richard III," starring Alec Guinness and directed by Tyrone Guthrie. From the start, the Stratford Festival has always thought big.

The first four seasons took place under the tent, which was then replaced by permanent quarters -- the Festival Theatre. From the outside, at least, the structure looks rather like a sports arena topped with a gargantuan Chinese hat. Inside, it dramatically wraps 2,262 spectators around a thrust stage. Big-drawing shows are mandatory, which is one reason musicals have recently been incorporated into the summer lineup.

"Cabaret" is certainly pulling 'em in. Festival representatives justify its inclusion among the more highbrow offerings by pointing out, somewhat defensively, that "Cabaret is not your usual Broadway musical." In that it sets the love affair of that flighty chanteuse Sally Bowles and American writer Clifford Bradshaw against the gathering menace of Nazi Germany, it is not. But the Stratford production, directed by Brian Macdonald, doesn't seem possessed of any stunning new insights.

Sheila McCarthy's Sally Bowles is close to dreadful, and the production numbers are neither flashy nor tawdry enough to galvanize the huge auditorium. The evening's salvation is Brent Carver, who plays the role of the emcee with a mixture of aggressive effeminacy and willful viciousness. There's more than a trace of Dietrich's Blue Angel in him.

Like the Shaw Festival, Stratford operates out of three theaters. Time precluded my seeing the work of The Young Company, made up of Stratford's rising actors, who were appearing in "Romeo and Juliet" on the Third Stage. (It was reported to be solidly performed.) But at the Avon, a reclaimed movie house in the center of town, productions of Chekhov's "The Cherry Orchard" and Ingmar Bergman's "Nora" lent some credence to Stratford's proud claims of being "the flagship theater of Canada."

"The Cherry Orchard" has been translated by British playwright Trevor Griffiths, who subtly shifts the emphasis away from the spendthrift Madame Ranyevaskaya and places it instead on Lopakhin, the commoner who will buy her estate and convert her precious cherry orchard into a tract of summer dachas. In James Blendick's artful portrayal, Lopakhin is no longer the crass upstart, but a complex, even likable creature, who is as much a pawn of changing economic forces as is the frivolous aristocracy that will be swept away by the revolution.

Director James Wood and his designer, the singularly named Utz, have come up with a stunning decor that blends into the Avon Theatre itself and suggests rooms upon roomswell beyond those we are seeing. The production is full of echoes and dislocated objects -- a dozen tables and glowing lamps, for example, pushed together, as if in an attic or a strange dream. In the end, when all the furniture is piled high in the center of the stage and covered with a shroud, one is left with the image of a huge iceberg. The emptiness is almost Beckettian.

That kind of telling starkness is also characteristic of "Nora," which strips Ibsen's "A Doll's House" of its usual naturalistic trappings, eliminates several of the minor characters and distills the drama into two intermissionless hours. The set is akin to a brightly lit boxing ring and the scenes are not unlike successive rounds in a prizefight for Nora's soul. The approach goes a long way toward reinstating a play too often thought to be merely an early proclamation of women's liberation.

What is being rigorously scrutinized is the notion of marriage itself and the dependencies and cruelties it can foster. Progressively possessed by a need to find herself, Nora (Lucy Peacock) becomes a woman without pity. Abandoning her husband (Joseph Ziegler) may or may not represent her salvation. But her departure definitely shatters his carefully constructed universe. In the final moments of this highly cinematic production, he is sobbing helplessly on the conjugal bed -- a child again or maybe an incipient madman, wrapped in rumpled sheets.

Such forceful moments are not exactly rare, but I nonetheless came away from the Shaw and Stratford festivals with an overriding sense of their gentility. Some of that, surely, has to do with the particular productions I happened to choose. Some of it also has to with the verdant surroundings and, at Stratford, the crisp trumpet fanfare that heralds the start of the night's performance. You earn your cultural Brownie points easily here; theatergoing conditions are incontestably pleasant, the pace leisurely, the night skies impressive.

By the same token, the productions collectively bear witness to a concern for polish, manners, well-shaped tones and fine fabrics, which is what one fellow American critic probably meant when he termed them "a triumph of style over content." You don't exactly get a feel for the temper of the times at either place. After a while, you want to take a piece of sandpaper to so much decorum -- rough up the surfaces, pitch some nails into the well-oiled machinery.

This is, indeed, theater for a midsummer night's eve. No wonder the tourists respond. But there's also something to be said for the reaction of Canadian director Guy Sprung, who runs the Vancouver Theatre at the other end of the country. Under his nose, the Shaw and Stratford festivals were being touted as having the best work in Canada.

"The festivals," he couldn't help retorting with a wry smile, "have the best costumed work.