The long-running fight over development of the Georgetown waterfront has flared anew at a hearing before a city examiner this week, with an impressive array of D.C. officials supporting the proposed development plan and a coalition of civic groups still trying to halt the project and have the area transformed into a park.

Both sides are arguing their case before Carol B. Thompson, Mayor Marion Barry's agent for historic preservation. In theory, only one narrow issue is before Thompson -- whether the $154-million project proposed by developer Herbert S. Miller is compatible with the historic character of surrounding Georgetown.

But much larger issues swirl at the fringes. Proponents of the project -- a commercial and residential complex with housing units costing up to $500,000 -- have emphasized the potential tax benefit to the city from such a venture, while opponents have claimed that the development would cause additional traffic congestion and pollution.

The dispute also spills into D.C. politics. Barry, whose coalition of support in his successful 1978 campaign included historic preservationists who generally oppose such projects, has long said that his "personal choice" would be for a park and no development.

But Barry's planning director, James O. Gibson, told Thompson this week that his stance is to "strongly recommend" going ahead with the development on what is the last remaining undeveloped stretch of Potomac River waterfront in the District of Columbia. Gibson said that despite the mayor's personal leanings, he could find no merit to the charge that the project is incompatible with Georgetown's historic character.

The two other highest elected District officials -- Del. Walter E. Fauntroy and City Council Chairman, Arrington Dixon -- have both written letters to Thompson expressing support for Miller's project.

In his letter, Fauntroy said the project "promises many good things for this community, including a development which will generate 1,410 jobs and provide $8.6 million a year in sorely needed tax revenues for the District."

In the end, though, the fight will likely continue no matter which way Thompson rules. The losing side is likely to take the case to court. As a result, turning the unsightly waterfront into either a multiuse development or a park will take months, probably years, to accomplish.

The waterfront land in question lies between K Street NW and the Potomac, from the mouth of Rock Creek to Key Bridge. Almost everyone agrees that the 18-acre area is currently a mess, featuring a cement factory and a parking lot for cars towed from no-parking zones by the city. The unsightly area is choked with weeds and strewn with debris, and overshadowed by the Whitehurst Freeway that runs over K Street.

Most of the land is owned by the District, and negotiations are being conducted to transfer it to the federal government for use as a park. Miller wants to develop the remaining 3 1/2 acres, which center on the foot of Thomas Jefferson Street.

Miller's project would total 738,000 square feet, with nearly half reserved as office space and the rest divided between stores and condominiums. Thomas Jefferson Street would be extended to the river and end at an elliptical boat basin, which Miller says he would make available for use by the general public.

The project was designed by architect Arthur Cotton Moore to complement Georgetown's graceful federal period buildings. The developers make much of the fact that they plan to build only a fraction of what they would be allowed to construct under current zoning regulations. Their buildings will be one-third lower than current zoning allows, they say.

But the opponents successfully persuaded the federal Fine Arts Commission in March and again in April that all 18 acres should be parkland. The commission's ruling was not decisive to the fate of the project, however, with the final determination resting with the city. The mayor has never overruled a Fine Arts decision, but planning director Gibson wants the city to do so.

Much of the testimony at this week's hearing has centered on the architectural merit of the project. Chicago architect Walter Netsch, a new member of the Fine Arts Commission, testified yesterday that he would rule the project out on such relatively arcane grounds as inappropriate "detail idioms" and an inappropriate "volumetric character."

But attorneys for developer Miller are expected to bring on their own architects as expert witnesses to testify that the project is in character with the neighborhood. They have sought to keep all other issues but architectural compatibility out of the proceedings.