Walnut Hills Shopping Center, Rte. 355, Gaithersburg 948-2175; Hours: 5 to 10 p.m. Tuesday through Thursday, 5 p.m. to 1 a.m. Friday and Saturday, 5 to 9 p.m. Sunday. Closed Monday. Prices: Most dinner entrees are $7 to $11. Credit cards: American Express, Diners Club, MasterCard, Visa.

When Giuseppe's opened about 1 1/2 years ago, it was an Italian restaurant that had a lot going for it: an interesting menu, very reasonable prices and some very good dishes, notably the pastas. It also had some weak points, mainly in the shrimp and veal departments.

We're happy to report that what was good remains good, and what was not so good has taken a great leap forward. In fact, Giuseppe's is now producing inexpensive Italian food that can hold its own against better-known restaurants in Bethesda and Rockville.

This is a cavernous, dimly lit restaurant of undistinguished decor, clean and unoffensive. Word about the good food and low prices seems to have gotten around, for the place bustles with business, particularly on weekends. For all the rushing around, the service has been quick, accommodating and friendly.

The appetizer champ here is mozzarella al Eduardo, in which creamy mozzarella cheese is wrapped in the lightest, crackliest puff pastry and served with just a bit of light, fruity tomato sauce. There's also a hearty, peppery minestrone, plump mussels in wine-garlic broth, and a good crusty white pizza topped with a little fontina and lots of garlic. The red pizza seems to have improved, with a nicely puffy crust and bright, fresh-tasting tomatoes.

Other good addenda are homemade bread sticks (that pizza dough comes in handy), and unusually well prepared salads of crisp romaine tossed with vinaigrette and a bit of grated cheese.

Lasagna has become such a warmed-over staple in cheap cafeterias that it's worth having the wonderful rendition at Giuseppe's just to remind you of how good it can be. Here it is firm and chewy with the right amount of sauce and cheese that gives distinctive tastes and textures to each layer.

The manicotti is outstanding, too, the ricotta filling a white creamy fluff, the pasta nicely standing up to the fork, the tomato sauce fruity and sparingly applied. Cappellini with clams is also very good, a big portion of al dente pasta with plenty of clams (canned, perhaps, but good) and a pleasant wine and garlic sauce.

Tortellini con pesto is impressive, the pasta pillows tender and firm and the sauce with plenty of fresh basil, but this is an oil-rich dish better suited for a shared appetizer than an entree.

The Italian sausage here is lean, juicy and fragrant with fennel. Have it with fettuccine at $6.95 or, for a real extravaganza, served in a wonderful, chunky tomato sauce with green peppers and onion over a bed of pasta. There is enough for two and it is only $8.50. Judging from this dish, the chicken cacciatore is probably a good bet, too.

The veal has been excellent lately; the best way to appreciate its flavor is in veal piccata, with just lemon, butter and white wine. Shrimp, too, has noticeably improved. Again, aim for the simplest version, in this case, all Eduardo.

Dessert? Go for the gelato.