The political row over the surprise appointment of Peter Jay, son-in-law of Prime Minister James Callaghan, as ambassador to Washington deepened tonight.

Callaghan was attacked at a full meeting of his own Labor Party's members of Parliament and accused of insensitivity of party feelings.

One former Labor minister, Alex Lyon, said it was not too late to withdraw the appointment.

Meanwhile, Conservative members led by shadow foreign secretary John Davies leapt to the defense of the ambassador Jay will replace, Sir Peter Ramsbotham.

Conservatives were angry that Ramsbotham, 57, was being attacked for being a "fuddy-duddy" who had to be removed to make way for someone more in keeping with the style of the Carter administration. The Conservatives have now introduced a motion in the House of Commons broadening the controversy to include theissue of Ramsbotham's reputation.

Conservatives are enraged by newspaper and radio reports that Foreign Minister David Owen, 38, did not like what he saw when he visited the Washington embassy in March.

Although Ramsbotham's diplomatic ability was recognized, there was criticism of the style of the ambassador, who is the son of a viscount and a former Conservative minister.

There has been talk of lavish parties with such film stars as Elizabeth Taylor and John Wayne, and fancy-dress balls at which Ramsbotham sang music hall songs wearing a false mustache. Owen reportedly thought this inappropriate, given Britain's present economic state.

Earlier, with the words "nepotism" and "patronage" ringing in his ears, Prime Minister Callaghan defended the controversial appointment in the House of Commons.

Jay, 40, economics editor of The Times, listened from the press gallery as Callaghan was asked by Conservative John Hannam why it was necessary to replace "our existing excellent ambassador in the U.S.

"Does this mean a return ot your predecessor's system of domestic patronage?" he added.

Callaghan told the packed House that it was an imaginative appointment in view of Jay's very high quality and caliber.

"The only question," he said, "is whether, because he was my son-in-law, I should refuse this appointment. Frankly, I felt if that was the only ground on which I should say 'no' it would not be right to do so. My judgment may have been at fault but that was the basis on which I had to judge."

Callaghan pointed out to critical parliamentarians that although Ramsbotham had served with distinction, Owen felt that a different approach to the job was required.

Labor member Willie Hamilton called for a debate on the issue because of "widespread disquiet." He has already introduced a motion on "government nepotism." Another labor member condemned "the enormous political insensitivity of the appointment."

It looked tonight as if the Jay affair may broaden into a general debate on how political patronage is handled in Britain. Some Labor members were advocating a switch to a system resembling that in America, where appointees are investigated and can be rejected by the legislators.

One Laborite, Jack Ashley, supported Callaghan in the House today saying Jay's appointment "recognizes brains and ability rather than orthodoxy and Dullness."

Owen is reported to have made up his mind quickly that things would have to change when he visited the British embassy in Washington in March.

Jay, speaking to reporters today, said his one worry is that his appointment would hurt the prime minister unfairly.

"My first reaction was, well, I must go and see him and talk to him - and I did talk to him, and he's a very big man," said Jay.

Jay said he hoped to "persuage people the appointment was justified" by doing a good job.

Jay has many qualities that will help him in Washington. Apart from his intellect - a first-class honors degree from Oxford University in politics, philosophy and economics, six years in the treasury - he has developed almost a love affair with America. He first traveled widely there on a Ford Foundation grant in 1966. He has also made many journalistic trips there and carried out his job of economics editor from the United States for most of 1969.

When TIme magazine listed 150 future world leaders in 1974, Jay was one of Britain's six candidates, the youngest apart from Prince Charles.

Owen wants Jay to bring his own attitudes to the job and to project an image of Britain. Jay told one reporter, "I shall try to dissuade the Americans from some of the strange ideas and assumptions they have about us - that we have an old-fashioned sort of society."

Whatever happens, Jay - the argumentative theorist with all the public polish acquired as presenter of a television current affairs program - can be expected to put forward a very different image to that of Sir Peter, wose own image is more in line with is hobby of in Virginia. Ramsbotham is given high praise here for helping to ease Concorde's path into the United Stae for helping to ease Concorde's path into the United States, however.