In an electric, almost giddy atmosphere brought on by the hope of peace and the belief that prosperity will follow. Egypt rushed today to complete preparations for the peace conference with Israel that seemed such a remote prospect only a month ago.

The streets of central Cairo are festooned with banners acclaiming the coming peace and praising President ANwar Sadat. "Sadat, hero of war, hero of peace, we saluate you," they say.

Newspapers are filled with euphoric reports on the Middle East tour of Secretary of State Cyprus Vance and the new "flexibility" he is said to have found in Israel. Journalists form Israeli papers are getting preferential treatment from government officials. The phone lines to Tel Aviv are open again.

Taking their cue from their president, Egyptians at every level are heaping scorn and ridicule on Sadat's Arab rejectionist opponents, especially Col. Muammar Qaddafi of Libya. The national disappointment over a rout by Tunisia in a soccer match that eliminated Egypt from next year's World Cup competition was leavened by mirth over a report that Qaddafi was going to reward each Tunisian player with a new car.

A photograph of the round table that will be used by participants in the conference that begins Wednesday was published on today's front pages. Egyptians say there will be seats for nine delegations although only four are expected to attend: Egypt, Israel, the United States and the United Nations.

The other invited participants for various reasons, will not be coming Egyptian sources say a Chair at the table will be labeled "Palestine," not "Palestine Liberation Organization," but there is no indication that any Palestinian representatives will be present.

Privately, Egyptian officials involved in the negiotations say they are not altogether unhappy that some of these states have decided to sit out the Cairo conference.

They believe it gives Egypt and Israel more flexibility as to format, allows the conference to move ahead without spending time on dogma or polemics, and makes it easier for Egypt to present its case without havingto defend itself against other Arabs who mighe be inclined to substitute bellicose oratory for real negotiations.

Egyptian officials says their task was greatly simplified by the decision of the PLO not to take part. Israel refused to have any dealings with the PLO on the ground that it is a terrorist organization. Egyptian sources say it was their understanding that if the PLO had come, the Israelis still would have attended but would have declined to meet or talk with any PLO representatives, virtually negating the purpose of this conference.

The Egyptians say they are going into these talks to listen at least at the beginning. The Egyptan position is that there can be no bargaining over the principle that Israel must evacuate all the Arab territories occupied after the 1967 war, and that the purpose of the talks is to discuss possible schedules and formats by which this can be carried.

As one informed Egyptian and official put it: "If their opening position is that they will not give up, let's say, Sharm el Sheikh, then that's not acceptable."

The eagerness with which Egypt is looking forward to this conference has tended to obscure the fact that the Egyptians do not yet know if Israel is prepared to give the answers Egypt wants to hear.

The Israelis, in the Egyptian view, have not committed themselves to anything except to negotiate in good faith. Nevertheless, the Egyptians were encouraged by the addition of a general to the Israeli delegation, seeing that as a sign that the Israelis are coming prepared to discuss substantive matters on withdrawal and boundaries.

Egyptian and American officials say there is no fixed agenda and no timetable for the Cairo conference, which is officially described as "informal." Vance reportedly asked that the talks be open-ended, and that fits in with the Egyptian plans.

According to the Egyptians, the probable scenario for the conference is something like this:

After a ceremonial opening at 10:30 Wednesday in the converted dining room of the historic Mena House Oberoi Hotel, next to the Great Pyramids, the conference will meet in closed session.

The delegations are at the level of what the Egyptians call "experts," but it would come as no surprise if the conference were upgraded to the foreign minister-secretary of state level if any substantive progress is made.

Egyptian sources say it is likely that while the conference is on, there will be unofficial contacts at a higher level outside the conference.

Both Israel and Egypt are expected to present their ideas about the nature of peace, not just between the two countries but between Israel and all the Arab states surrounding it.

The Egyptians say their proposals will be in the form of "working papers" that were prepared over the weekend.

It is not clear, and sources in the Egyptian delegation say they themselves do not know, to what extent the conference participants are authorized to negotiate and to what extent offers must be taken back to higher authority for approval.