The fifth-grade boys swooned. The girls giggled. Arms waved wildly. The bids mounted. The boys oohed. The girls aahed. The autographed picture of singer Olivia Newton-John was on the auction block. The bidding was furious. The auctioneer egged them on. Higher, higher. And, finally . . .

Sold! For 12 hard-earned dollars to the big fan in the back row and the envy of every other fifth-grade boy in the room, Scott Mell.

A few items earlier, the autographed, living-color photo of President Reagan and the first lady had gone for $10--after the auctioneer tossed in two comic books and a free coupon for a dozen doughnuts.

Lowest bid of the day was $3 for the handwritten note from U.S. Supreme Court Justice Sandra Day O'Connor. In the eyes of fifth graders, it isn't the high and powerful who draw the big bucks. Give 'em a rock star any day.

For 97 fifth graders at Guilford Elementary School in Sterling Park, last Friday's "Famous People Auction" was The Payoff for a year of reading books and writing book reports.

"We got them interested in reading by bribing them," said fifth grade teacher Penny Gow. Guilford is one of eight Loudoun County elementary schools using the auction concept as a reading incentive.

The students read a book. Write a report. Get paid from $2 to $5, depending on the book. "Little Women" meant more money than the biography of Joe Namath. No money actually changed hands; the students kept track of their "earnings" in savings-account passbooks donated by a local bank. The four classes of fifth graders amassed $1,472.50 among them.

And while the students were writing book reports, teachers and parents were writing celebrities and national companies, seeking donations for The Payoff. About half of the 400 companies and stars contacted by the school responded.

The donations grew and grew and grew: an autographed spaghetti recipe from Jack ("Quincy" and "The Odd Couple") Klugman; 14,400 pieces of Trident chewing gum from the Warner Lambert Co. that produces it; a "Lou Grant" script signed by Lou himself, Ed Asner; a stuffed toy Clydesdale from Anheuser-Busch Inc.

It was that huggable, brown-and-white stuffed horse that captured 10-year-old Namisa Roberts' fancy.

"She's had her nose in a book all year long," said her teacher Mitzi Wilfang. Namisa read relentlessly. The money in her savings account grew and grew. Her classmates spurred her on.

" 'You're going to be able to buy everything,' the other students would tell her," said Wilfang.

But Namisa didn't want to buy everything. She wanted one thing. That horse.

"That's what I've been waiting for the whole year," she said, admitting the "money" and the horse were the big incentives behind her book-reading binge.

Namisa took her seat at the auction Friday with $122 in her passbook--more than any other student in the room.

And when the horse went on the auction block, Namisa was ready with her money and her father was ready with the camera, waiting to snap the winning picture.

It may have been the most familiar sale of the day to auctioneer Evan Moehler, a Loudoun County assistant principal who works as a professional livestock and estate auctioneer in his spare time.

The bidding was nerve-wracking. $30. Most of the arms in the room shot up. $50. Arms were swinging madly. $70. The war was on. $90. The tension was almost unbearable. Namisa was standing on her chair. The girl behind her was waving frantically. Her father was pacing a rut into the floor. The running drone of the auctioneer's voice came faster and faster. $98 . . . $99 . . . $100. Going once, going twice . . . Sold! To the tiny, bouncing girl on top of the chair. Her peers, who'd been pushing her to read, read, read all year, cheered and clapped ecstatically.

For Namisa, it was The Ultimate Payoff.

For the teachers at Guilford, The Payoff was the new interest the students found in reading and the arithmetic they learned by keeping track of their earnings.

"The program has increased their reading," said Penny Gow. "At the beginning, they were reluctant to read. As the donations started coming in, their interest really picked up."

Gow said the school librarian reported a noticeable increase in the number of books checked out by fifth graders. And the types of books they checked out also switched from the thin, easy-to-read biographies of sports heroes to more fiction. Some students even began delving into the classics, said Gow.

About a third of the elementary schools in Loudoun County had similar programs this year, according to Lynn Miller, elementary school supervisor. The idea was spawned by a guest speaker at an elementary teachers' workshop early in the school year, she said.

"Anything to get them to read," said Gow.

Like a case of bubble gum, the hottest selling item of the day next to Olivia and the Clydesdale.

"I've been waiting for this," said Julie Zebroski as she plunked down $25 and walked down an aisle of jealous eyes with her Payoff for hours spent in the library.