At the new Diamond Head Restaurant in Georgetown, "you will be greeted by HPESOJ, god of waterfalls . . . guarding the 4-ton lava fountain made entirely from volcanic rocks." You will "enjoy the lush tropical atmosphere as you sip Polynesian drinks and dine amidst palm trees and fountains in the thatched roof booths."

You will do all this, according to the Diamond Head's advertisements, at 1010 Wisconsin Ave. NW, just north of K Street - and that fact has the Citizens Association of Georgetown, and its attorneys. Courts Oulahan and Christopher Keller, hopping mad.

Two years ago, when the Diamond Head's owners were in the process of applying for a Class C liquor license, they told the D.C. Alcoholic Beverage Control Board very emphatically that their address was not 1010 Wisconsin Ave. True, they had used 1010 Wisconsin on their original application, but that had been a terrible mistake, they insisted.

The Dodge Center building, then barely under construction, was to front on both K Street and Wisconsin Avenue, and the Diamond Head's correct address, its attorneys told the board, would be 3217 K St. The restaurant might be closer to the Wisconsin Avenue side, but 3217 K would be "the monumental, formal entrance" to the building, according to an architect's affidavit.

That trivial-sounding amendment to the Diamond Head's ABC application meant one thing and one thing only. Measured from K Street rather than Wisconsin Avenue, the new restaurant would be far enough away from Grace Episcopal Church, at 1041 Wisconsin to avoid application fo the "400-foot rule" - a provision of the ABC regulations that generally forbids issuance of liquor licenses within 400 feet of a church.

Demon alcohol has slowly been closing in on Grace Church for the last several years. Located smack in the middle of some of the city's most frenetic commercial development, the church is fighting what looks like a losing battle against the proliferation of bars and restaurants near the Georgetown waterfront.

"I feel we're going to be inundated with them in the next few years," says the Rev. Jo C. Tartt Jr., pastor of Grace Church.

"We don't really like being in this position," says Tartt. "The last thing we want to look like is a bunch of moral prigs who don't like alcohol." But Tartt adds that he and his parishioners generally share the view of the Citizens Association of Georgetown that the area has become overcrowded with bars, generating unwanted noise, traffic and litter.

Because the Diamond Head appeared to be a bona fide restaurant, rather than a bar, "we didn't particularly want to oppose them," says Tartt. On the other hand, the church feared that if it came out in favor of one applicant, it would lose its right to object to others, he says.

Since the Diamond Head case, the ABC Board has granted two more liquor licenses that apparently fell within the 400-foot range of Grace Church, each time citing a different reason for not applying the 400-foot rule.

The first of these cases involved "Grace St. Junction," a proposed restaurant - it has yet to open - at 3210 Grace St. NW. The ABC Board's deliberations initially turned on which of the church's two entrances to measure from, since one was within the 400-foot limit and the other outside it.

The church, supported by the Citizens Association of Georgetown, argued that the Wisconsin Avenue gate should be used since it was closer to the proposed restaurant and the regulation called for a measurement from the church's "nearest street main entrance."

But the applicants argued for a measurement from the South Street gate instead, on the grounds that more parishioners used it. So the board conducted a survey one Sunday morning, and after counting 45 churchgoers passing through the South Street gate, and only 19 passing through the Wisconsin Avenue gate, decided the issue in the applicants' favor.

"That was really screwy," says Tartt. "We think the owners of Grace St. Junction got some of their employes to come to the church that day."

Oulahan and Keller object to the board's interpretation of the phrase "nearest street main entrance" - just one of a number of instances, they say in which the board has read its rules in a way that favored applicants over protesters.

But ther great gate debate ultimately became an irrelevant exercise. At the final ABC hearing in the case, Tartt testified that his church had about 75 members, or fewer - though he didn't know it - than the 100 required to invoke the 400-foot rule.

Actually, says Tartt, he had 160 members at the time, but "I had never been on the stand before and I was nervous as hell; I just blew that."

A subsequent effort to correct the record on the size of Grace Church's membership was rejected by the board, and the license was approved.

The most recent case involving Grace Church and the 400-foot rule was that of Delfini's, a Greek restaurant at 1023 31st St. NW. In granting Delfini's a Class C license, the ABC Board once and for all declared the 400-foot rule inapplicable to Grace Church, based on a finding that the area's W-1, or waterfront, zoning amounts to commercial zoning. The 400-foot rule does not apply in a commercial zone.

But in January 1977 the same ABC Board rejected an application from the Georgetown Incinerator, a proposed restaurant at 3100 South St. NW., because the site was only 188 feet from Grace Church. "It's part of a pattern of extraordinary legal slopiness," says Keller, who is not alone in accusing the board of erratic and inconsistent behavior.

The Delfini's decision also appeared to dismiss traffic problems, parking problems and the "saturation point" argument as factors to be considered by the board. Any request for a moratorium on new liquor licenses in Georgetown "could be addressed . . . to the District of Columbia City Council," the board wrote. Complaints about traffic or parking, it suggested, could be taken up with the police.

The board thus decided to "effectively kiss off" a whole assortment of issues traditionally raised by liquor license opponents, says Keller.

Keller works full time for the Federal Trade Commission, and a good deal of his spare time is consumed with the business of the Citizens Association of Georgetown. He recently sent a letter to the ABC Board about the Diamond Head, for instance, enclosing a copy of one of its advertisements.

It was just a letter of inquiry says Keller - he was not necessarily asking the board to revoke the Diamond Head's license. He has yet to receive a reply, he says.

But the ABC Board, according to deputy director Mary E. Reed, is taking the Diamond Head matter very seriously.

If the Diamond Head's operators were guilty of "false pretenses," says Reed, the board would take appropriate action.

At the Diamond Head, meanwhile, manager Joseph Shao says he was baffled by recent conversation with an ABC investigator, who said "we should stop advertising this way . . ."

"I don't know why they're making such a big thing about our address," says Shao. "The restaurant has a liquor license, right? There's no dispute about that . . . We're a very legitimate business trying to make a living here."