Arab leaders out to block Anwar Sadat's peace initiative with Israel condemned the Egyptian president today but failed to agree on a joint plan of action

After eight hours of talks at the ornate People's Palace, Millers representing Algeria, Iraq, Libya, South Yemen, Syria and rival Palestinian organizations have yet to walk out concrete steps against Egypt.

The heads of delegations were scheduled to meet again Saturday morning in a third day of efforts to hammer out a strategy designed to prevent Sadat from concluding a much feared separate peace with Israel.

Officials emerging from the evening session - which finished well past 11 p.m. - presented confused and often contradictory accounts of the proceedings.

So far at least - and the Arab world is known for its sudden changes of heart - two major differences still separated the participants and prevented them from adopting joint policies.

The differences, which emerged throughout the day, involved:

Iraqi and Syrian failure to overcome long-standing hatred between the feuding branches of the Baath Party ruling in their respective capitals.

Dissension in the Palestinian camp between Yasser Arafat, the leader of the umbrella Palestine Liberation Organization, and his leading extreme leftist critic, George Habash, leader of the Popular Front for the Liberation of Palestine.

The argument centered on a shared Syrian and PLO determination to avoid being maneuvered by the more radical participants into slamming the door on all peace negotiations.

Basically, President Hafez Assad of Syria is torn between his anger at Sadat's go-it-alone diplomacy with Israel and a desire to use this conference as proof that he himself is neither isolated on the one hand, nor dominated by the extremists, on the other.

Indicative of the Syrian mood was the sttitude toward extremist demands that all participants cut off economic and diplomatic ties with Egypt. One Syrian described the demand as "unproductive."

So far only Libya has taken such a step.

Iraq tried again this evening to persuade Syria to go back on its four-year-old policy of trying to find a negotiated settlement to the Arab-Israeli dispute.

Assad, the only leader present whose territory is in part occupied by Israel, appeared in no mood to join the outright "rejectionist camp" - Middle East shorthand for Arab states refusing any negotiations with Israel.

Simiarly, Arafat, who for the time being is allied with Assad, came under sharp attack for not jettisoning his implicit mandate for peace negotiations.

Habash argued that Sadat's visit to Israel had proved that Arafat's position amounted to complete surrender - especially its commitment to negotiations and to setting up a Palestinian state on the Israeli-occupied West Bank of the Jordan River. Habash pressed for his brand of "popular liberation struggle" involving revolution to overthrow conservative Arab governments as a first step to toppling Israel.

Furious that his Libyan host, Muammar Qaddafi, had authorized Habash to speak at all, Arafat angrily insisted at one point that he alone was entitled to speak in the name of all Palestinians because of his leadership of the PLO.

The exchange between the two Palestinian rivals led Algerian President Houari Boumedienne to ask them what they really wanted.

Beyond these considerations, all participants still give signs of hoping to present a solid enough front to the outside world to be taken seriously.

The especially hoped to persuade the oil-rich conservative states - first and foremost Saudi Arabia - to at least think twice before approving Sadat's initiatives.

Had it not been for Sadat's visit to Jerusalem the very presence here of some of the participants would have seemed impossible.

Assad and Habash for example, have had a long-standing feud over most of the past two decades and at the same table were both Syrian Foreign Minister Abdel Halim Khaddam and Iraqi leaders that Damascus accused of trying to assassinate him less than two months ago.

Among the many questions left unsettled this evening was whether the participants would meet again next week in Baghdad as the Iraqui government has proposed.