REHOBOTH BEACH, DEL. -- Often, the Strand is open at dawn on Sunday mornings, the dancers still bouncing under the blue and green lights.

No alcohol is permitted in this after-hours club, located in an old movie theater one block from the boardwalk. Instead, the fashionably dressed patrons, most of them men, drink case after case of flavored water. They pour into the cavernous building for special events: a Day-Glo party, a Mona Lisa tea dance, a "splash" show with handsome mermen flanked by spear-bearing maidens. At 3 a.m., there are 500 dancers.

In this seaside resort, nicknamed the Nation's Summer Capital, the largely gay nightclub has thrived despite a controversy last summer that convulsed the town and led to a ban on more new bars. This year, many people say that harmony has been restored in Rehoboth, but others are not so sure.

"I think the townspeople have finally come to grips with a certain reality: That there are a large percentage of gay yuppies," said Joyce Felton, an owner of the Strand. "It's taken a long time for this little mid-Atlantic, sleepy, conservative, Republican resort community to awaken to the fact that this is a powerful, underfacilitated group. They know it would be economic suicide and social suicide to recriminate."

But some gay men and women in Rehoboth feel that if last year's referendum was an attempt to maneuver them out of town, this year the hostility is more personal.

Although town police report no problems involving harassment of gay people, some tourists say they have suffered more verbal abuse this season. For a while, rumors were flying that patrons leaving the Strand in the predawn hours were a particular target of harassment and beatings, but Felton and Police Chief Harry Maichle Jr. insist that is not the case.

"You know what? It's always been going on. It goes on everywhere," Felton said about the unofficial complaints of name-calling, rock-throwing and spitting.

Last August, voters decided that no new bars should be allowed in Rehoboth, a town that swells from 2,000 to 50,000 people in the summer. The bar referendum and the accompanying barrage of publicity went beyond the issue of alcohol, touching on questions about the future of the still-quaint village. Vacationers were pitted against year-round residents, homeowners against the business community, and some believe, homophobes against the town's considerable gay population.

Supporters said the measure would ease traffic congestion and reduce the raucous, late-night crowds, some of whom were known to urinate on lawns or race their cars through quiet streets. Imagine more of these places, supporters of the ban said, pointing to the Strand, a bar that regularly attracts 600 people even though it was denied a liquor license. What will happen, they asked, to this "family resort," long favored by Washingtonians put off by the gaudier pleasures of Ocean City. The ban passed by a 2-to-1 ratio.

A year later, the Strand is still hopping. Jay Smith, president of the powerful homeowners association, marvels at how quickly the tensions seem to have ended. Felton, who owns the popular Blue Moon restaurant, agreed. Last summer, she acidly maintained that some residents "have a vision of this town becoming a Sodom and Gomorrah." Now, she speaks of a new harmony and says she is determined to try again to obtain a liquor license for the club.

"We take away from Fire Island, P-town {Provincetown, Mass.}," said J.C. McCartan, events coordinator for the bar. "People who want something a little more laid back, but still sophisticated."

But to those on the receiving end of insults, the town is not always welcoming. Joe Ponte, 38, a District hairdresser and a Rehoboth vacationer for 15 years, said he has suffered incidents almost every weekend this summer and he is getting tired of it.

"I don't feel it is isolated," he said. "There's a real timbre growing to this whole thing. {Before now} I've always been lucky in that nobody's bothered me. I guess it's the way I carry myself. I really scowl when I walk. But when somebody walks by me and says, 'Faggot,' what am I supposed to do? Say 'Hetero'?"

Not long ago, Ponte said, he was insulted by two young lifeguards who laughed and crossed their fingers -- the way some people make crosses and pretend to ward off vampires -- as he walked along the beach.

"I said to myself, 'Wait a minute, Joe, don't jump the gun.' But I turned back and they did it again. I started to let it pass. I thought, 'Why wreck your day?' And then I thought, 'Well, they've already wrecked my day.' They made me feel like a slimebag. So I go up and introduce myself and I said, 'Would you help me? Tell me what this symbol means.' And I did the cross, and they said, 'Oh, it's a solar block.' And I said, 'Well, funny you only seem to do it when I pass by.'

"The thing is, I'm sick of it." he said. "I'm not bothering anybody."

Thomas Moore, an artist from Philadelphia, said he too has noticed an increase in insults this summer, adding that the AIDS crisis and increasing militancy of the gay population has made him feel less tolerant of such behavior.

"You just can't let them get away with it any more," said Moore, 34, who has been visiting Rehoboth since he was a child. "I've made up my mind I'm not going to."

At the Strand on a recent predawn morning, however, those somber thoughts seemed at least temporarily cast aside. Shirtless men with green-glowing choker necklaces and fresh tans danced to throbbing music produced by the quarter-million-dollar sound system. Above, in the quiet Sky Lounge, the former movie projection room, small groups conversed on the leopard-print couches. The routine is that those who want to drink spend the earlier part of the evening at another Rehoboth bar; at 1 a.m., they meet at the Strand.

"As long as people want to be here," McCartan said, "we're open. Everybody says, 'It's 1 o'clock. Let's dance.' "