Montgomery County public school officials and officials of Grace Episcopal Church met late yesterday in an effort to iron out details of the expansion of an Episcopal private school into an abandoned county school building.

The negotiations followed the revelation yesterday that Montgomery County Executive Charles W. Gilchrist signed a lease with Grace Episcopal on Monday, one day before the County Council was scheduled to debate legal attempts to block the move.

The church's plans to move part of its elementary school operation into the former Larchmont Elementary School building in Kensington has been controversial because the Kensington area is the site of the county's major public school busing plan. Opponents of the move fear a private school would attract white students away from the public schools.

Gilchrist, appearing before the council, said he had signed a letter of intent in May to go forward with the contract--a lease that would bring the county $30,000 a year. Gilchrist said he had told the council he would honor that letter if church officials indicated there were no other suitable school sites. Gilchrist has said in the past that the Grace Episcopal school, currently located in Silver Spring, is well integrated and won't siphon off white students who otherwise would attend schools in the Kensington area.

Council President David Scull and two other council members said yesterday that Gilchrist defied the council's request to hold off negotiations with the church until school and council officials exhausted all options in finding an alternate site for the church school.

School and council officials have questioned whether a private school would threaten the area's integration plan involving two schools in Chevy Chase that have predominantly white student bodies and Rosemary Hills Elementary, where black students are in the majority.

Signing the lease Monday, said council member William Hanna, raises the controversy "to a level of a test of power between the council and the executive. . . . It is the worst kind of situation for the county to find itself in."

County school officials had proposed seven other sites to Grace Episcopal, but church officials yesterday said each of the alternate sites had problems.

Church officials reiterated past statements that they will take measures to avoid interfering with the busing plan, such as limiting enrollment of students from the area and not accepting any students whose parents have said they will not participate in the public school integration plan.

But Norman Christeller, Maryland-National Park and Planning director, who was asked by Scull to take part in Larchmont negotiations, warned the council that research and previous experience in the Rosemary Hills area show that small shifts in racial representation eventually could lead to racial imbalance.

And school Superintendent Wilmer S. Cody, an expert in public school desegregation, told the council that leasing the building to Grace Episcopal "is not in the public interest." The council is scheduled to resume discussions today. graphics/map: Southern Montgomery County By Dave Cook--TWP