A devout Moslem and a devout Jew sit down on Christmas Day along the Suez Canal to negotiate a settlement of the bloody dispute that has afflicted the Holy Land, their nations and the Middle East for 30 years.

Despite many contacts in public and through undercover channels established between Egypt and Israel over the past six weeks and widespread belief in a secret consensus, informed officials say that a deal between President Anwar Sadat and Prime Minister Menahem Begin has not been made in advance of Sunday's meeting and that success is not assured.

From all indications even the two principals are uncertain how the meeting will turn out; yet each of them - and the world at large - has an enormous stake in the results.

Some observers believe that both men have far too much invested to allow themselves to fail. Nonetheless, the two sides enter the Christmas talks so far apart in basic conception as well as in many details that accommodation is not likely to be easy.

Sadat, who set the stage in stunning fashion by flying to Jerusalem in a bid for peace a little over a month ago, maintains that he has given Israel most of what it sought so long in vain: recognition, acceptance and the promise of normal relations with Arab neighbors. Sadat is said to believe that he is due a response on the scale of his unprecedented and unexpected gesture.

Sadat is seeking an agreed statement of principles including Israeli withdrawal from the lands it occupied in the 1967 war and a form of self-determination for Palestinian Arabs in a place they can call their own.

"We insist on ending your sufferings and on the enemy's [Israel] withdrawal from the Gaza Strip and the occupied West Bank of the Jordan River," Sadat reiterated to a group of 164 West Bank Palestinian Arabs who called on him at Ismailia today.

With a statement of overall principles, which he sometimes calls "the headlines" for a final settlement, Sadat can confront fellow Arab states-men with the fruits of his diplomacy and persuasive evidence of his allegiance to the common cause.

Begin, from advance reports, is prepared to return the occupied Sinai to Egypt under agreed security and phasing arrangements, and to offer a large degree of civil self-rule to Palestinians in the West Bank and Gaza. While Begin has made major changes in his position about the West Bank, he appears to be far from an agreement to return all occupied land.

According to those familiar with Israeli official thinking, Sadat's initiative is considered a welcome change that provides the basis for serious and hard bargaining. But Sadat is said to see what he has done as the essence of his side of the bargain rather than as the starting point for horse-trading.

The key area in dispute is the West Bank and the central question is how Sadat and Begin will reconcile or paper over the conflicts in positions in a statement of principles or a final settlement. This is crucial and delicate question for both sides.

Reports circulated here today thatthe Sadat-Begin meeting may continue overnight Sunday rather than concluding in one day as originally planned. Other reports suggested the two men would schedule additional sessions rather than continue overnight if major agreements cannot be obtained on Christmas Day.Egyptian officials said there is no way to be sure how long the talks will last.

In preparation for the Christmas meeting, Sadat today named Egyptian ambassador to West Germany, Mohammed Ibrahim Kamal, to be foreign minister to succeed Ismail Fahmi who resigned over Sadat's peace moves. Diplomatic experts could not ascribe any clear political signficance to the choice of Kamal.

Kamal is a career diplomat who for the last four years was ambassador to Ponn. He and Sadat met in the late 1940s when both were accused and later cleared of mudering the pro-British minister of finance, Amin Osman.

The meeting at Ismailia, in a former villa of Suez Canal pilots, is scheduled to start in late morning after the arrival of Begin and his party from Isreel by special plane.

The Israeli leader's plane will land at Abu Suweir military air base, about 15 miles from Ismailia.

Begin will helicopter to the villa with an expected arrival time of 11:15 a.m. (4:15 a.m. EST).

Official talks will begin shortly after Begin's arrival. Sadat and Begin will eat lunch together - also at an unspecified time - and then probably meet for another round of talks followed by an afternoon press conference whose time will be announced Sunday.

Several Israeli flags are to be flown along with the Egyptian banner at the meeting site. They are believed to be the first Israeli flags to be flown with official authorization here.

U.S. Assistant Secretary of State Alfred Atherton and other American officials who have been taking part for two weeks in Egyptian-Israeli preliminary discussions here about a Geneva conference are not invited to the Ismailia meeting, although the United States has been consulted by both sides.

The American officials plan to watch the Sadat-Begin press conference on Egyptian television from a Christmas dinner at the Cairo residence of U.S. Ambassador Herman Eilts.

Begin will be accompanied to Egypt by Foreign Minister Moshe Dayan and Defense Minister Ezer Weizmann. Also in the party will be Attorney General Aharon Barak and Maj. Gen. Herzl Shafir, commanding officer of the southern front.

Mrs. Begin, who had been expected to make the trip, became ill with influenza and was to stay home, presidential spokesman said.

Begin paid visits tonight to Rebbi Kook, spiritual leader of the Jewish religious settlements in the West Bank; and Zvi Shiloah, leader of the "Land Movement" that supports the settlers.

Shiloah quit the executive board of Begin's Likud bloc to protest the Egyptian-Israeli peace moves. The settlers fear Begins plan makes too many concessions in the West Bank.

Wire services also reported these developments:

President Sadat's peace initiative helps the Arab cause, according to King Hassan II in an interview published in Cairo by the semi-official daily Al Ahram.

Hassan said that Sadat's speech in the Israeli Parliament last month contained to deviation from the line agreed to by Arab leaders since the 1973 Arab-Israeli war.

The Moroccan soverign suggested that Arabs should neither support nor criticize Sadat's action, but should remain patiently silent until he completed his mission for peace.

Hassan said that he had proposed to the Palestinians four years ago that he might engage in a dialogue with the Israelis.

The Egyptian ambassador to the Soviet Union, Handi Abu Zeid, recalled for consultations after Moscow's hostile reaction to President Sadat's peace initiatives, will remain in Cairo a "while longer," the Cairo weekly newspaper Akhbar E1 youm reported.

Lebanese Premier Selim Hogs arrived in Damascus for talks with Syrian leaders on the consequences of recent developments in the Middle East for Lebanon.

He told newsmen that the situation made the need for direct contact with Syrian leaders "more pressing" than usual.