The old soldier and the young cadet stood beside the lush green parade ground, watching the flags flutter and listening to bugles blow.

"Those are pre-shined shoes, aren't they?" said the retired Army general as he stooped to frown at the 18-year-old military student's black plastic shoes. "We didn't have them in my day."

"At the Virginia Military Institute, a 141-year-old college where tradition is not so much hidebound as set in stone, almost every change since electricity has been frowned upon. The horse cavalry of Stonewall Jackson's time rode only reluctantly into the Shenandoah sunset. Compulsory church attendance was sadly surrended to the Supreme Court. More recently, and perhaps most drastic at a school known in some quarters as the West Point of the Confederacy, racial tensions led to the banning of "Dixie" from all ceremonial parades.

"Damn foolishness," is the way one white-haired alumnus judged this week's Dixieless commemoration of the Battle of New Market, a Civil War bloodbath now soaked in glory, during which 10 VMI students were killed and 47 wounded before the Union forces were defeated.

But changes are easily noticed at VMI, where every building on campus seems to have a museum in its basement. Set in the 19th century town of Lexington and surrounded by the ancient Blue Ridge Mountains, the current corps of cadets marches to a drumbeat that has remained essentially the same since before the Civil War.

"The old saying here is that VMI better get into the 20th century before it ends," jokes John Hughes of Arlington, who graduated this week with 258, fellow cadets, after three days of ceremonies which reinforced the school's singular devotion to heritage and history.

In the same week that West Point and other military academies were graduating their first coed classes, VMI's all-male corps presented an almost defiant counterpoint. At VMI, the first state supported military college in the nation, officials proudly advertise the Institute as the last "classic," all-male military college still receiving state funds.

"When people ask 'When are you going to admit women to VMI,' we answer 'When we have to.' And we don't have to yet," says Maj. Jim Adams, VMI information officer.

Keeping traditions alive is essential, argue school administrators, if VMI is to continue producing citizen soldiers and Virginia gentlemen worthy of the Institute. And in a world gone mad with permissiveness, deceit and spinelessness, they say, VMI graduates have never been needed more.

"This nation and many institutions have drifted dangerously if not irreversibly from . . . law, duty and patriotism," warned Virginia State Sen. Elmon T. Gray (D-Waverly), VMI class of 1946, after receiving the New Market Medal last week. "At least this institution will stand against the tide."

Holding fast against the tide has been a conscious decision on the part of VMI officials. It is a decision that has paid off in alumni loyalty and financial support. Admission applications for next year are the highest in VMI history. A five-year campaign to raise money for a $30 million endowment fund which began just a year ago, already has received $27 million in pledges.

The political climate created after crises in Afghanistan and Iran has not HURT VMI. For the first time in almost two decades, America's military and the schools where they are polished are being seen in an admiring light.

"The military did go through a pretty tough period," said Adams, who graduated from VMI in 1971, at the height of Vietnam protests. "I think the military once again has become an honorable profession."

Adams, who is a major in the Virginia Militia, a military unit that exists almost entirely within VMI, is charged with selling the educational, moral and spiritual benefits of the Insitute. The job is a breeze when he is talking to alumini or parents who want their boys to grow up in VMI trim. But convincing high school seniors that four years of discipline, hardship and not a little abuse at VNI is preferable to four years of pholistine adventures at a non-military school, he admits, is a considerably harder sell.

"When I went home for Christmas, all my friends would tell me about their wild times going out with girls and then ask me what I do. I have to tell them I marched around a lot and had sweat parties," says Kevin Caulfield a first year cadet, or "rat," from Springfield.

Rats are, as a rule, treated like worthless slugs at VMI during the six to eight months of intiation by the senior class. Rats are obliged to memorize hundreds of obscure facts, walk only on prescribed routes and perform a host of services for upperclassmen. Punishment for real or alleged failures is doled out at "sweat parties," where rats are put through body-breaking exercises.

The rat system at VMI is considered crucial to establishing class unity. The idea is that through common suffering, the first-year students are melded into one sore set of "brother rats." It is the same philosophy behind Marine boot camp, except that Marines, say VMI cadets can only take it for six weeks.

The rest of a cadet's stay at VMI may be heaven compared to his rat life, but it is hardly cushy. Cadets march to classes six days a week, march to meals three times a day and are never allowed to cut class. Saturday night is their only night out, and even then, curfew is midnight. Demerits or confinement to barracks are the penalties for breaking rules, and there are so many rules it is virtually impossible to obey them all.

"You have to decide what rules are worth breaking. And you learn to pay for the rules you break," says Mark Sofia, a 1978 graduate of Robinson High School in Fairfax County who was confined to barracks for four months this year after being caught with a beer on campus.

"This place is a little socially retarding," admits Rick Tabb of Fauquier County, who graduated this week. "A lot of cadets lose their girlfriends."

There are two sets of rules at VMI those established by the Institute and those by the Corps of Cadets themselves. The heart of the Corp rules is the honor code, which prohibits cadets from lying, cheating and stealing. And it seems to work remarkably well. Cadets do not own locks. And they insist, they never have any need for them. At least not on the "post."

"It's hard to adjust to the real world," says cadet Caulfield, whose brother Bill is in his second year at VMI. "You expect everybody else to be as honest as you."

The rules imposed on cadets by the administration are another matter. There is no dishonor in disobeying many of those rules. In fact, there is some respect to be gained, say cadets, for risking punishment in the pursuit of a little extracurricular wildness.

Post-curfew panty raids at any of four women's colleges within a 90-minute drive at VMI are traditional. The most celebrated and controversial, raid was in 1978 at Mary Baldwin College, when 500 cadets were caught by what cadets considered to be overly zealous school officials. When each of the cadets was confined to barracks for two months, all of them rebelled.

In a not unprecendented action, the cadets waited until parents' weekend, then announced to VMI officials they would not march unless the punishment was reduced. The college surrendered.

There have been half a dozen organized rebellions at VMI in the past 30 years over such issues as the length of Easter furlough and the interference of school officials in the honor system, which by VMI tradition is soley in the hands of cadets.

A smaller, but more celebrated dispute occurred in the early 1970s over New Market Day. In 1971, black students, who were first admitted to VMI in 1968, began to rebel at the playing of "Dixie" during the ceremony. That year they refused to turn eyes right to the Confederate flags placed at the graves of six of the 10 cadets killed in the Civil War battle. In 1972, black students boycotted the parade. And in 1973, when blacks protested again, a majority of their fellow cadets voted to change the ceremony. But the Board of Visitors at VMI voted unanimously to keep the ceremony unchanged.

Finally, a year later, after continued protests and the promise of more to come, VMI surrendered again.

But while the death of "Dixie" may have upset some alumni who lined the parade ground this week for New Market Day, the commissioning ceremonies and graduation, it did not seem to affect the festive mood.

"Things are still going right," said retired Gen. Lemuel L. Shepherd, the commandant of the Marine Corps from 1952-55 and, more importantly last week, an aluminus of the VMI class of 1917. "The objectives are the same, it's just a little fashion."

Among the hundreds of alumni who returned to VMI last week were half a dozen active or retired generals and some of Virginia's most powerful businessmen and polticians. Although graduates of VMI are obliged to accept commissions from the armed services if offered, and roughly 85 percent of each graduating class is made the offer, only 15 percent of the graduates make the military their career.

While the alumni reminisced fondly about brother rats and days gone by, the current graduating class was uttering not a word about wanting to remain.

"This is a great place to be from, but a hell of a place to be at," said one cadet, repeating an old saw.

John Hughes, who graduated from Fort Hunt High School in 1976 and his committed to three years of Army duty, put it more personally.

"I'm floating. I really never thought this day would come."