President Carter's plan to create a separate cabinet-level Department of Education won approval from a House-Senate conference committee yesterday after House conferees agreed to drop controversial anti-abortion, anti-busing and pro-prayer amendments.

But the bill still faces formidable opposition when it returns to the House for final approval. Initial passage last July 11 came on a very narrow 210 to 206 vote.And some of those who voted in favor of it were conservatives won over by the very amendments deleted yesterday.

Yesterday, Rep. John N. Erlenborn (R-Ill.), who led the house opposition on grounds that creation of a department could allow the United States to dominate local educational agencies and schools, refused to sign the conference report, as did several others including Rep. Arlan Strangeland (R-Minn.) and Rep. William S. Moorhead (D-Pa.)

The bill would create a new agency with a budget of about$14 billion a year and a work force of about 18,000 employes. It would take control of most of the education programs currently in the Department of Health, Education and Welfare, such as elementary and secondary education grants and loans, college aid, vocational education and vocational rehabilitation, plus several smaller programs from other agencies and the Defense Department's overseas school system for children of military personnel.

The bill was proposed by Carter as a way to give education more attention and prestige in the federal government, as well as to speed up bureaucratic action. It is strongly backed by the National Education Association, The National School Boards Association, some unions and a host of education organizations.

However, the American Federation of Teachers, some civil rights groups and labor unions oppose it, arguing it could fragment programs for the poor and weaken civil rights programs now coordinated in HEW. Some believe the AFT opposition resulted in part from fears that its rival, NEA, would dominate the new agency.

Erlenborn and other conservatives argued that it would have too much power over local schools.

The bill passed the Senate easily, 72 to 21, but in the House conservative opponents sponsored a series of amendments barring school busing and abortion, curbing civil rights regulations and allowing prayers in public schools, though the Supreme Court has held them in violation of the Constitution. Their avowed aim was to load down the bill with such controversial provisions that even some of its supporters would turn against it.

This nearly worked. The National Urban League and the United Auto Workers both said the amendments made the bill unacceptable. Yesterday all the amendments were dropped and in their place language was substituted reaffirming the principle of local control over educational policies, personnel and curricula.

But the count still may be close when the conference report goes to the House floor.