THE PENNSYLVANIA Avenue Development Corporation is about to make a fateful decision affecting a premier Washington institution, the venerable National Theatre. In the next day or two, the PADC, a group chartered by Congress to enliven the Avenue from the White House to the Capitol, will select one of three proposals for redeveloping the block bounded by 14th, 13th, F and E streets NW; the National is in the 1300 block of E. Each proposal includes hotel and office space, restaurants and shops. But one plan - jointly submitted by the National Press Club and Atlanta developer John Portman - would mean the destruction of the National Theatre.

Such has been the concern expressed for the National that the theater issue may well determine which proposal will be selected for the whole complex. Originally, the Press Club/Portman proposal called for no theater at all. The club's officers were sharply criticized for the omission. The issue reportedly became so touchy that when Carol Channing, now starring at the National, addressed the club a few weeks ago, almost a dozen questions about the fate of the National were screened out by club officers. So much for the spirit of free inquiry and expression.

Belatedly and hastily, the Press Club/Portman proposal has now been amended to include a new theater. But the National would still be required to relocate or close down for several years. And having been bought out for $1.5 million, it would have to buy its way back in for at least $7 million.

The two other proposals would make it possible to save the theater in its present form, and even to keep it operating during construction on the rest of the block. One bid, made jointly by the Marritt and Quadrangle corporations, would simply leave the theater as is. Local developer John Akridge's proposal would offer the choice of having a new home built elsewhere on the block or of renovating the National - at no cost to the theater. National's board, which has indicated it would like to remain in its present home, prefers the Akridge proposal.

So do we. It offers a sound arrangement for the theater. It is also a better plan for the avenue. Its modest-sized hotel seems appropriate for the corner opposite the Willard Hotel - which is to become, again, a major hotel. The suggestion for several levels of stores, shows and restaurants, with skylights and a passageway from Pennsylvania Avenue to F Street, is just the magnet to draw pedestrians downtown.

A formidable amount of the city's history and culture is centered on the National Theatre. As the oldest continuously run theater (140 years) in the country, it has offered thousands of productions. Jenny Lind sang there. "Mr. President," "My Fair Lady," "For Colored Girs . . ." have run on its stage. While the future of the National isn't the only factor the PADC will have to weigh, it surely ought to be high on the list.

That's our view. And that, incidentally, would also have been Carol Channing's view at the Press Club the other day - if she'd been asked. Each night now, at the close of her performance in "Hello, Dolly!," she has been telling her audiences that "it's so nice to be back here - where we belong!"