A Warrenton woman who last month allegedly shot and killed her wealthy neighbor's farm manager in a bitter hunt country land dispute was indicted today on murder and firearms charges by a state Circuit Court grand jury.

In this area of white board fences, grazing thoroughbreds and discreet country estates about 80 miles west of the District, the identity of the participants as well as the circumstances of the shooting have made the slaying a prime topic of local conversation.

The well-to-do neighbor is Patricia Saltonstall, divorcee, heiress and descendant of a prominent New England family, the boundaries of whose Points of View Farm in Rappahannock County figured in an escalating quarrel that authorities said led to the incident.

The defendant, Diane E. Kidwell, is the wife of a Warrenton insurance broker.

Kidwell is also a former employe of Dr. Murdock Head, creator of Airlie Foundation in Fauquier County whose conviction on bribery conspiracy charges in federal court in Alexandria last summer is now on appeal.

Kidwell, who testified against Head, has turned for help to an old acquaintance from the days of the Head investigation in the late 1970s. As her chief defense lawyer she has hired John Dowd of Washington, former head of the Justice Department's Organized Crime section who spearheaded the Head investigation.

Kidwell is accused of murdering Saltonstall's farm manager, Rance Spellman, with a single shotgun blast from the window of her pickup truck as Spellman was bulldozing a hotly disputed right-of-way between the two properties in the early morning of Nov. 9.

Dowd and codefense attorney Rodney G. Leffler, a former assistant Fairfax County prosecutor, said today they will argue Kidwell acted in self-defense. Authorities said they found a rifle and a handgun in Spellman's possession atop the bulldozer after his death.

Kidwell gasped and then wept today as the five-member grand jury returned its findings about 5 p.m. in the tiny, red-brick Rappahannock County courthouse. Circuit Court Judge Thomas Horne released Kidwell on a $25,000 property bond and set Jan. 12 for pretrial motions in the case.

Rappahannock prosecutor Douglas Baumgardner said Kidwell will be tried for second-degree murder, which in Virginia requires proof that the defendant acted from malice. If convicted, Kidwell could be sentenced to five to 20 years in prison. A separate charge of using a firearm in the commission of a felony carries a mandatory two-year sentence.

In a civil complaint filed prior to the shooting, the Kidwells alleged Saltonstall had erected a gate across an existing right-of-way in September in violation of the terms of her deed. She also intended to widen the right-of-way and demanded that the Kidwells remove some of their own fences and gates, the complaint said.

A Circuit Court hearing on the Kidwells' request for a temporary injunction to block Saltonstall had been scheduled for Nov. 10, but Spellman was shot one day earlier.

Local authorities have been quoted as saying the Kidwells called Virginia State Police shortly before the incident, after they saw Spellman advancing along the right-of-way on his bulldozer about 8 a.m. Diane Kidwell reportedly blocked Spellman's way with her pickup before the fatal shot was fired.

State police arrived within minutes, authorities said.

Spellman, a Vietnam veteran, was buried on the Saltonstall property, a cowboy hat on top of the coffin and his horse, with his boots inserted backward in the stirrups, standing nearby, a local resident said.