To the men mending fences in a field below, it looked as if the pilot of the single-engine Beechcraft was having trouble gauging the peak of 3,000-foot Fancy Gap Mountain, shrouded in a damp, cottony fog.

The plane approached the mountain twice, turning back each time to gain altitude. Its third approach was its last.

"We heard the engine cut off a few miles away, sudden-like," one of the men recalled. "I said to my friend, 'I believe he cashed it in right there.' "

The plane, heavy with hundreds of pounds of high-grade marijuana, shuddered into the mountainside here in southwest Virginia on Oct. 17, shearing treetops, splintering 14-inch pine trunks and igniting the fuel tanks.

Rescue workers found the pilot buried under the smoldering bales, burned, said a medical examiner, "to cinders."

The identity of the pilot, the plane's intended destination, and the whereabouts of a local charter pilot named Wallace "Squirrel" Thrasher, whom police have linked to the plane, are pieces of a puzzle that has speculation among locals crackling like a small-town telephone line.

"Everybody has a theory," said one woman.

Yet evidence to support those theories is slim, and more than a month after the crash the mystery remains unsolved.

Late last week the investigation into where the plane was headed and who was waiting to meet it was joined by federal prosecutors and the U.S. Drug Enforcement Administration.

State and federal officials say the accident is just one example of the drug smuggling that they believe has increased in the Blue Ridge Mountains of Tennessee and Virginia, as well as parts of Georgia and the Carolinas, since federal surveillance of the Gulf Coast intensified with the creation of President Reagan's South Florida Task Force in 1982.

"There seems to be a trend toward operating in . . . the lesser-populated areas," said Jerry Rice, a DEA official in Virginia.

Last year, for example, a twin-engine plane loaded with 700 pounds of high-quality cocaine ran out of gas and went down in a field in rural Brunswick County, Va., not far from the North Carolina line. The pilots walked away, and the case is still under investigation.

A year earlier, a jet carrying seven tons of marijuana landed at the Franklin City airport in Isle of Wight County in Tidewater. The pilots walked off when the men they were meeting did not appear. Twenty people were arrested after an 18-month investigation.

No statistics are available from investigators on the number of smuggling cases in the area. "I have no doubts that there's quite a bit of it going on," said Jay Cochran, director of the bureau of criminal investigation for the Virginia State Police.

Virginia's network of interstate highways, dotted with small colleges and universities, and the existence of more than 120 private airports and landing strips, are added attractions for smugglers.

Most of those airports are not manned at night and are equipped with remote-controlled runway lights that enable planes to land unobserved.

"These airstrips out here are very attractive to smugglers," said Virginia State Police investigator R.L. Woodard. "The small planes are very difficult to apprehend, and the money is luring a lot of people into the business."

Identification of the planes can be difficult.

"The typical report we'll get on a landing strip is a guy who calls and says, 'There's a landing strip on Billy Joe's property and I see people come and go with no lights, sometimes two or three vans parked there,' " Rice said.

"When you ask for information, license tags, something, this is what you get: 'Oh, no, I don't go down there. I don't know who's involved,' " Rice said. "With four agents, we can't afford to put one man on a mountainside for a month to wait and see if anything happens."

Drug abuse counselors in the Roanoke area say that the quantity of drugs, particularly strong drugs such as cocaine and LSD, has been increasing, an increase they link in part to the apparent increase in air smuggling.

The body of the pilot downed at Fancy Gap has not been identified positively, but Woodard said last week that officials are "99 percent sure" the remains are those of a man named Michael Joel Goldstein, who police say has had addresses in the District and Northern California.

It was Goldstein who fueled the plane at a small airport in Avon Park, Fla., a few days before the crash, Woodard said. A woman employe at the airport there said the man who fueled the plane said only that he was flying it to Fort Pierce, Fla., to have it repainted.

A DEA spokesman in Washington declined to release any information about Goldstein except to say, "Let's put it this way: He's no stranger to Florida."

To further complicate the investigation of the crash at Fancy Gap, the $80,000 military surplus reconnaissance aircraft was registered to what investigators believe is a fictitious name and Richmond address.

But police investigators did have one local link to the downed plane: Wallace Thrasher, a charter pilot in his late 40s who recently had moved back to southwest Virginia from Fort Pierce.

Thrasher, investigators said, was the person who paid cash for hangar fees and major repairs to the plane while it was parked at Roanoke Regional Airport. Before police could question Thrasher, however, he had disappeared.

Over six feet tall, with deep-set blue eyes and a thick mane of graying hair, Thrasher had been a high school football and track star in the small town of Pulaski, 35 miles north of Fancy Gap. After graduation and a stint in the Navy, he worked at selling clothes and airplanes, bartending and occasionally modeling, according to friends in Pulaski.

He kept the home town apprised of his exploits after he had left home. In 1977, the Southwest Times in Pulaski published a story detailing Thrasher's account of his two-year imprisonment in a Mexican jail on what he said were trumped-up drug-smuggling charges. He claimed to have been released after two years, but only after being tortured to sign a false confession.

"He was a soldier-of-fortune type. He loved adventure," remembered friend and pilot Donnie Holliday.

When Thrasher came back to southwest Virginia this summer, he took up residence in the 10-room, two-story log cabin he had built several years earlier.

Some in Pulaski say that they wondered how he could afford such a house, with its Jacuzzi, satellite dish and separate guest house, but few inquired.

"I never asked about his personal business," said Holliday. "That's how you keep friends."

Friends and police alike were surprised to read an obituary in a Roanoke newspaper stating that Thrasher had died Nov. 5, two weeks after the crash on Fancy Gap Mountain.

The paid obituary, placed by Thrasher's wife Olga, did not include a cause of death, but some of those who attended a subsequent memorial service say they were told by family members that Thrasher had died in a charter plane crash in Puerto Rico. Others say they heard Central America, and still others say Africa.

"They weren't specific," said the Rev. Elmond Johnny Howlett of Pulaski about his conversations with Olga Thrasher, "other than saying there was a plane crash and he was burned up and they weren't able to retrieve a body."

Longtime acquaintances say they cannot decide whether Thrasher really is gone or has pulled his most audacious stunt yet.

State investigators say they can find no record of the crash in Puerto Rico or elsewhere.

"Let's just say that we would like concrete proof that he is dead," said state police investigator Andy Metro.

Olga Thrasher could not be reached for comment, and Wallace Thrasher's elderly father, James L. Thrasher, says he has no idea how his daughter-in-law learned of the crash.

A lawyer for Olga Thrasher said that she learned of her husband's death from the Carroll County sheriff's department near Fancy Gap. The sheriff's department says that it learned of Thrasher's death from the newspaper obituary.

Last week, federal prosecutors in Roanoke met with state and local investigators for three hours and came out promising to help with the case. That help could include a grand jury investigation.

Until then, the residents of Pulaski and the hill towns around it will just have to wonder about the crash that, for most, is a too-vivid reminder of a clandestine network of drug smugglers.

"All these young kids wouldn't have [drugs] to get into if people our age weren't bringing it in," said one woman, who asked not to be named. "So, in a way, they deserve what they get."