In 1963 Defense Department installed a small nuclear reactor on the grounds of Bethesda Naval Hospital to use in studying the effects of atomic blasts on human and animal victims. For years, no one objected to having nuclear neighbors so close to residential Bethesda -- few people, in fact, were even aware the facility was there.

But changing times and different perceptions of nuclear power have caught up with the Armed Forces Radiobiology Research Institute (AFRRI). Concern over "worst possible" scenarios -- an explosion that would rain radioactive debris over much of Washington or terrorist thefts aimed at building and detonating a cobalt bomb -- has led a newly formed Montgomery County group to challenge AFRRI's attempts to renew its reactor's license for another 20 years.

Led by Dr. Irving Stillman, a Chevy Chase family doctor who also holds a doctorate in chemical physics, a group called Citizens for Nuclear Reactor Safety his filed a petition with the Nuclear Regulatory Commission calling for public hearings and eventual closure of the reactor.

"We don't know what would happen in accident conditions," Dr. Stillman said. "The reactor is 18 years old. A lot of the safeguards they claim it has are probably starting to wear out."

The group won a significant victory last week when the Montgomery County Council endorsed calls for public hearings on the reactor's future. A letter sent to the regulatory commission also requested that "an appropriate Federal agency prepare an environmental impact statement on this facility." (There was no such study when the reactor was originally set up.)

The campaign -- some 2,200 people have signed another petition expressing support -- is the antinuclear movement's first concerted challenged to the collection of research reactors that split atoms in relative obscurity in the Washington area. Known as a TRIGA (for Training, Research, Isotopes and for its manufactuter, the General Atomic Company of La Jolla, Calif.), the Bethesda reactor is one of four like it located inside the Beltway, industry sources said.

A General Atomic spokeswoman in Washington praised the safety record of the reactor, which generates far less thermal energy -- one megawatt compared to 30,000 -- than a typical commercial reactor. Radiation routinely released into the atmosphere and sewage is so minute that sensors used by federal regulators cannot even detect it, she said. "There is literally no environmental impact in having a TRIGA in your back yard," she said.

Often used to teach nuclear physics, the reactor contains numerous safety devices to protect the amateur operator, the spokeswoman said. "If the student makes a mistake in what he's trying to do, the reactor automatically shuts itself off."

Dr. Stillman's group challenges almost every one of the manufacturer's claims. The reactor's most serious potential hazard is what technicians call a "cladding failure," that is, a rupture of the aluminum casing that contains the fuel, they say. Zirconium coming into contact with air or water heated to 900 degrees or more could create a powerful (though nonnuclear) explosion that, Stillman says, could propel AFRRI's entire stock of radioactive material into the atmosphere to settle on surrouding neighborhoods.

An accident on this scale has never happened at any TRIGA reactor. But Stillman contends that company claims that cool-down safeguards render such an explosion impossible cannot be accepted.

Stillman also says the reactor and other facilities at AFRRI discharge enough radioactive wastes into the environment to pose a serious potential health hazard to local residents, in particular infants and pregnant women. The group also alleges that the facility is poorly managed (its military commanders are rotated every few years) and is not conducting research that is relevant to its charter.

Some of these contentions are supported by a 1979 study of AFRRI conducted by the Pentagon's Defense Audit Service. A draft of the document said that "about 80% of the reports published during fiscal year 1975 through 1978 were unrelated to the Institute's mission."

It also reported violations of security regulations in the buildings. "During a 34-day period, we found that the facility alarm system was set off 18 times by personnel leaving work after normal duty hours from unauthorized exits."

Security concerns like these have led Stillman and his group to allege that terrorists could gain access to an underground room where large quantities of Cobalt-60 are stored for use in exposing lab animals to gamma rays.

Anyone carrying the cobalt away would die within days, Stillman says. But in the meantime, cohorts could attach the highly lethal material to a conventional bomb, explode it in the air and contaminate an enormous area of ground.

Col. Bill McGee, speaking for AFRRI, said "it's conceivable you could blast in with dynamite and a gang of desperate men," but no place in Washington would be completely immune to such an attack. Col. McGee noted that armed guards patrol the hospital grounds (though not AFRRI itself). Anyone gaining access to an AFRRI conference room with one of its periodic seminars would have to go through steel doors and three separate checkpoints to reach the cobalt room.

A three-member panel appointed by the Nuclear Regulatory Commission is currently reviewing the petition for hearings and is expected to schedule hearings. A decision is due within 20 days.