Leaders of Grace Episcopal Church have said they are willing to cancel plans to put a private school in the former Larchmont Elementary School building if another school can be found, according to a confidential memo from Montgomery County school board president Blair Ewing to the staff of the county public schools.

Church leaders indicated in a closed meeting Saturday their willingness to settle what has become a controversial issue involving the county's school integration plan, according to the memo.

The closed meeting was arranged by school, county and church leaders after Ewing and council president David Scull said they would consider filing suit to block County Executive Charles W. Gilchrist's decision to lease the Larchmont site to Grace Episcopal.

The building is half a mile from North Chevy Chase Elementary, one of three schools involved in a recently revised busing plan between predominantly black and predominantly white neighborhoods in the Chevy Chase and Rosemary Hills elementary areas. Critics of the move have argued that the location of any private school in the area would attract students who did not want to participate in the integration plan. Gilchrist and church officials, however, have said that the school--with a one-third minority enrollment--would not draw those students.

Grace Episcopal currently runs a day school for 156 students in grades one through six in Silver Spring. Day school officials have said they could add about 100 students if they expand onto the Larchmont site for grades three through six.

In a one-hour morning meeting described as congenial and low-key by several people who attended, four church officials told the eight county and community leaders they were distressed by the controversy that has arisen about the school. They said the church has a reputation, both locally and nationally, as an organization that supports integrated education. The Rev. William R. Wooten reportedly told the gathering he is willing to move the school to another site if a number of conditions are met.

Among those conditions are: another building of suitable size, a location close to the Silver Spring school, a decision made quickly before school begins and compensation for money already spent on Larchmont for roofing and other repairs.

Wooten yesterday declined to discuss what transpired in the meeting but added that church staff members were meeting to calculate expenditures.

Gilchrist, who yesterday announced he is forming a task force to study the leasing of vacant public school buildings to private schools, declined to comment on the negotiations but said that he would be "sympathetic" to any new agreement that church and school officials might be able to reach.

The county school board is scheduled to discuss alternative sites and action during their board meeting today.

One site on the agenda for possible use is the McKenney Hills Learning Center in Silver Spring, currently a school for handicapped children.