A Washington state couple, whose daughter was left severely retarded by spinal meningitis after Navy doctors misdiagnosed her illness, settled a two-year lawsuit yesterday against the federal government for $7.3 million.

"It's been so long . . . we're really pleased about the settlement, but it's almost anticlimatic," said Linda Crandell, a former Marine sergeant who with her husband sued the government over treatment their child received in the summer of 1977 at the Quantico Marine Base hospital.

The settlement provides a direct payment of $625,000 to the Crandells, who now live in Kent, Wash., and their lawyer, William O. Snead III of Fairfax County. It also establishes a medical trust for their daughter, Jennifer, valued at $2.8 million and annual payments to the girl and her family expected to total $3.9 million. "We certainly thought it was a just settlement for all parties," said Assistant U.S. Attorney Nash W. Schott. "The settlement is not in any way an admission of fault or liability of the United States, its agents or its employes."

On June 26, 1977, a Sunday, Linda Crandell took her daughter Jennifer to the Quantico hospital after she heard strange sounds coming from Jennifer's crib. The child, then 6 months old, was blue around the mouth, jerking her arms and legs and breathing with difficulty.

Her illness was not diagnosed properly during two visits to the hospital and it was not until July 1, when doctors at Walter Reed Army Medical Center in the District confirmed Jennifer had meningitis.

During trial proceedings, experts testified that Jennifer's retardation resulted from the failure of military doctors to quickly diagnose the meningitis. Jennifer remains severely retarded and in need of constant care.

The Crandells' malpractice case came to trial before the late District Court Judge Oren R. Lewis in Alexandria and was dismissed in March of last year after a three-day trial. A year later, the 4th U.S. Circuit Court of Appeals in Richmond ordered a new trial for the Crandells, saying that Lewis made "glaringly" improper decisions in the course of the trial.

Linda Crandell said yesterday that she and her husband, also a former Marine sergeant, would like to hire a teacher to live with Jennifer or live near their home to tutor her every day. She said her daughter, a former Frederick, Md., County Easter Seals poster child, has shown improvement during therapy.

"She'll be set, but she deserves it," said her mother. "She's really a very good little girl, very loving."