The Palestine Liberation Organization today opened the door a crack on one key barrier to Arab-Israeli peace talks, while Secertary of State Cyprus R. Vance urged the Arab League to show flexibility on "this overriding goal."

"Things are moving," Egyptian Foreign Minister Ismail Tahmi told reporters after meeting with Vance tonight. Fahmi did not amplify his new optimum, although Egypt is as eager as the Carter administrationis for reconvening a Geneva conference on the Middle East before the end of the year.

A possible opening for compromise in the touchy question of Palestinian involvement at the talks came today from the head of the PLO's permanent observer delegation to the United Nations, Zehdi Terzi.

Terzi said the mayors from the West Bank of the Jordan River could represent the PLO at a Geneva conference, since "all Palestinians are members of the PLO," by PLO interpretation.

Although Terzi contended this statement offered no change in the PLO position, it may allow negotiations to clear the hurdle of Israel's insistence that it will not negotiate with the PLO. Israel has previously agreed that Palentinians who are not known to be PLO members, such as mayors of towns in the Israel-occupied West Bank, could be in a Jordanina delegation to the conference.

However, Terzi said he would require one item that may be a sticking point for the Israelis. He said the "invitation" to the conference "should be addressed to the PLO" which "should be invited as all the other parties and on an equal footing."

Israel adamantly refuses to deal with the PLO, the umbrella organization for most Palestinian groupings, on the grounds that the PLO is committed by its charter to the destruction of Israel.

Vance told representatives of 19 Arab League nations today that he will conduct "intensive consultations in the weeks ahead" to bridge the gap between them and Israel on terms for starting the Geneva conference.

State Department spokesman John Trattner said the Vance-Fahmi talks "as in the past few days here, have been another good step" toward a Geneva conference.

He said Vance and the Egyptian discussed "the elements" of the "working paper" that was agreed on in the early morning hours here Wednesday between Vance and Israeli Foreign Minister Moshe Dayan. This document is a formula between the United States and Israel on how a new Middle East conference will be held.

Vance told a luncheon meeting of Arab foreign ministers and U.N. representatives at the United States Mission to the U.N.:

"Looking into the year ahead, I would not be so rash as to say that it will see the conclusion of peace treaties (between Israel and its bordering Arab nations). But I am optimistic enough to say that in my judgment it will be progress towards that goal."

He said that to succeed in convening the conference, "all the parties will have to subordinate their particular interests and concerns to a degree to this overriding goal. This means that there must be decisions as to what is most important and what is less important. And we must concentrate on those things which are essential and most important."

Vance told the Arab diplomats that "the agreed basis" for the Geneva conference must be, as the United States has repledged to Israel, U.N. Resolution 242 and 338. These resolutions make no reference, however to the creation of a Palestinian entity or state, and the PLO has refused to accept them. But Vance also added, 'The Palestinians must be represented at the conference if we are to achieve a just and lasting peace."