Federal officials and Alexandria City Council members who met this week over chicken and steak in a hotel dining room apparently have softened a five-year legal impasse over development of the city's waterfront.

Assistant Secretary of the Interior Robert L. Herbst, one of 18 officials and environmental authorities at the dinner, announced for the first time that the government "might be willing" to resolve legal hurdles "if the city brings us a suitable (development) plan."

"Their cooperation absolutely surprised the hell out of me," said City Council member Donald C. Casey. "It was a fine display of good will."

Herbst also announced at the gathering, held at the Ramada Inn, that he will send a three-member team to the city next week to begin seeking solutions to the impasse.

Title to a 16-block stretch of the river line in Old Town has been frozen in a parkland-versus-development dispute since the Interior Department sued the city Dec. 21, 1973.

The issue has been hotly debated since, with millions of dollars worth of prime real estate involved and possibly the nature of Old Town at stake.

Although the gathering was not an official council meeting, council member Ellen Pickering immediately placed on Tuesday's council docket a resolution accepting Herbst's offer.

About a month ago Michael Frome, an Alexandria resident and conservationist, suggested to Mayor Frank Mann that all interested parties sit down to discuss their positions over a quiet dinner.

Mann proposed a dinner-council meeting to be held in executive session, with reporters barred and the city picking up the tab, Frome and several council members said.

After Vice Mayor Nora Lamborne questioned the legality of a council meeting held outside council chambers, however, Mann canceled the official nature of the gathering. The dinner went on as planned.

Several local reporters were invited in by Frome, who said he paid for the dinner but who declined to reveal its cost.

Mann himself has been an issue in the lengthy waterfront debate. John Richards, a friend with whom Mann says he is in business was recently sued by the city for nonpayment of $24,000 in real estate taxes and penalties on a piece of prime waterfront property.

Such "personality issues" have prolonged the dispute and Frome used his "good offices" as a respected private citizen to bring the warring factions together, Pickering said.

The city's latest plan for waterfront development is due in several months and with it could come a resolution of the dispute, officials said.