The rector of Grace Episcopal Church said yesterday the church intends to go ahead with plans to house part of its private school in the former Larchmont elementary school building, just north of the county's major public school integration plan area.

In a letter to Montgomery County school and government officials, following weeks of negotiations, the Rev. William R. Wooten Jr. said members of the church vestry have decided not to cancel plans to lease the Kensington site.

Church leaders met with county school officials in an attempt to locate an alternate site after complaints arose about the private school's potential threat to a busing effort in the area. But Wooten said yesterday that the seven proposed sites were either too far, cost too much to renovate or could not be ready before the school year begins in September.

In a multi-paged memo, Wooten outlined five steps, including restricting enrollment, that the church would take to ensure that its day school would not be used by parents seeking to flee the integration plan that involves the predominantly minority Rosemary Hills and predominantly white Chevy Chase areas.

Wooten said Grace would not accept students whose parents had openly said they would not participate in the busing plan, an apparent reference to Chevy Chase parents who signed affidavits earlier this year saying they would enroll their children in private school rather than send them to Rosemary Hills.

Public school and county officials, however, expressed disappointment over the church's decision, and said they would seek other routes to block the school's move.

County Council President David Scull, who has criticized County Executive Charles W. Gilchrist for supporting the lease, said he would ask the council today to go to court to block the lease.

"I think it is intolerable that the county government would participate in pulling the rug out from under the school board's efforts at racial balance," Scull said.

In another effort to encourage the church to break its lease, the county Board of Education voted last night to press the council to find another user for the Larchmont site and to reimburse the church for any funds it may have spent rehabilitating the building.

Board member Marian Greenblatt, a critic of the busing plan, welcomed the church's decision and said statements that the school would interfere with the integration plan were absurd. Minorities make up about one-third of the enrollment at Grace, which currently is housed at a site in Silver Spring. The Larchmont building will serve students in grades three through six.

More than 400 residents of the Kensington area, who have said the empty building is devaluing their property, submitted a petition yesterday to the County Council urging it to honor the school lease.