Egyptian President Anwar Sadat said today that the Palestine Liberation Organization, by participating in the Tripoli summit conference of Arab rejectionists, had "cancelled" Arab resolutions recognizing it as the sole legitimate representative of the Palestinian people.

He said that he and King Hussein would continue to abide by the resolutions of the 1974 Arab summit conference at Rabat that gave the PLO this special status, but he hinted that if the PLO does not reenter the peace-making process on his terms, he will turn to other spokesman for the Palestinian people.

If that happened, it could greatly simplify the process of negotiating a peace settlement with Israel, which refuses to have any dealings with the PLO on the grounds that it is a terrorist organization committed to the destruction of the Jewish state.

But it could further divide the Arab world, already deeply split over Sadat's peace initiative, becuase the PLO and its leader, Yasser Arafat, have acquired both legal and emotional standing as the authentic voice of the Palestinians. The PLO is a full member of the Arab League as if it were a sovereign state.

Sadat made the remark about the PLO at a press conference after talks with U.S. Secretary of State Cyrus Vance. Vance later today arrived in Israel where he was met by Foreign Minister Moshe Dayan and taken immediately to Prime Minister Menahem Begin for initial talks. In his brief arrival statement, Vance assured Israel of the "full support and friendship of the United States."

The PLO had called on Palestinian mayors and other dignitaries in the lands under Israeli occupation to boycott Sadat during his visit to Jerusalem, but the Egyptian leader has been carefully cultivating those Palestinians willing to meet and talk with him. A delegate from the Gaza Strip arrived in Cairo yesterday.

While in Israel, Sadat was criticized for making all the standard Arab demands on behalf of the Palestinians while neglecting to mention the PLO by name in his public statements.

At the press conference today, Sadat stopped short of saying the PLO had dealt itself out of the peace negotiations by endorsing the rejectionist resolutions of the Tripoli summit early this week.

Sadat recalled that the PLO was recognized by all member states of the Arab League at the 1974 Rabat summit as the sole legitimate representative of the Palestinian people, Arab leaders also agreed then, Sadat said, to work for a peaceful solution to the Arab-Israeli conflict. This was a conference to what he has said were secret agreements that did not appear in the public communique.

By rejectings a peaceful solution at the Tripoli meeting, Sadat said, the PLO had "cancelled" Rabat. Asked in what way, Sadat replied, "In the field of the PLO and in the field of working toward a peaceful settlement - because we have agreed in Rabat to push the peace process to achieve those goals."

Asked if he meant that he was withdrawing recognition of the PLO, Sadat replied, "I didn't say this. I said in spite of the fact that they have cancelled this, King Hussein and me, we are sticking to the Rabat decisions."

The clear implication of the way Sadat phrased his continued recognition of the PLO was that he was doing so by free choice and no longer feels himself bound to do so by the Arab League accord in Rabat.

Speaking of the Palestinians, but not of the PLO as an institution, Sadat said they were welcome at the peace table at any time. "We are ready to have them. Their place will be ready whenever they are prepared to come," he said.

Sadat invited the PLO to take part in next week's preliminary peace talks here but addressed the invitation to "the Palestinians." Egyptians officials were deliberately coy about specifying which Palestinians were meant.

Though Sadat says there has not yet been any formal reply to the invitation, Arafat went to the rejectionist conference in Tripoli and the PLO endorsed a communique condemning Egypt for "high treason" to the Arab cause and calling for economic and political sanctions.

The Egyptians were surprised and disappointed because they thought they had an understanding with Arafat by which he would agree to accept Palestinians who were not affiliated with the PLO as representatives in the peace talks.

That still might happen, since Egypt [TEXT OMITTED FROM SOURCE]