Egypt, nearing a halfway point in the year allotted for Palestinian autonomy negotiations, appears increasingly willing to envisage a substitute formula for seeking an end to Israeli occupation of Gaza and the West Bank.

The open talk about what could be done if the autonomy talks fail reflects disappointment at the meager progress so far, and a growing assessment here that Egypt and Israel differ even more than had been realized on the purpose of the negotiations.

It also coincides with Egypt's irritation with Israel's recent decisions to allow its private citizens to buy Arab land on the West Bank and to strengthen half a dozen Jewish settlement already set up in the occupied territories.

Prime Minister Mustafa Khalil said yesterday that he intends to make these decisions a major topic in his talks next week in London with Robert Strauss, the special U.S. Middle East negotiator, and Israeli Interior Minister Josef Burg, the head of Israel's negotiating team.

Khali, responding to Egyptian reporter's questions, said the talks so far have exposed a disturbing gap between Egypt and Israel on the understanding of the autonomy to be granted the occupied territories under the March 26 peace treaty. This also will be brought up in London, he said, but he agreed with a suggestion that perhaps only a conference among President Carter, Egyptian President Anwar Satat and Israeli Prime Minister Menachem Begin could make the important decisions on this touchy issue.

The Egyptian foreign affairs minister, Butros Ghali, also raised the prospect of another forum during his travels earlier this week in Western Europe. He suggested an international conference, including Jordan and the Palestinians, to deal with the West Bank issue if the current negotiations fail to produce agreement.

This would have the advantage of shifting away from Arab opposition to the Camp David agreement, thus opening the way for King Hussein's endorsement and perhaps the cooperation of the Palestinian Liberation Organization. But talking about it now, one Foreign Ministry source said, provides the current negotiations an excuse not to succeed.

Despite the talk of alternatives, Khalil emphasized that Egypt remains committed to the negotiations under way, which wound up another technical sessions today in Alexandria, Egypt. His willingness to speculate on alternatives was seen primarily as a result of Egyptian embarrassment over the recent Israeli settlement decisions.

Sadat's uncompromising retorts to his Arab critics notwithstanding, many Egyptian officials feel troubled at seeing their government negotiate with Israel even as the Jewish state announces the strengthening of its settlements on the territory under negotiation.

"The Israelis are taking actions that are completely contrary to the objectives [of the talks], said one high official.

Throughout the negotiations Saday has kept silent on the settlements and throughout the negotiations has seemed more willing to compromise than his aides. In the past he has made it clear he believes there is no rush to make progress in the autonomy talks. After his last talks with Sadat in September, Strauss also came away convinced that the tough issues should be tackled only later.

But some officials in the Foreign Ministry and elsewhere in the Egyptian government reportedly believe that Strauss has slowed the pace too much. They are eager for some visible signs of progress to show their Arab opponents, particularly on the settlements issue.

"We definitely would like the United States to be more active," said a high government official with close access to Sadat. "Maybe they're not doing enough."

The speaker of the People's Assembly, Sufi Abu Taleb, told a group of visiting American newspaper editors today that if the talks fail, "it will be your [the United States] fault."

Strauss has said the autonomy negotiators should concentrate on reducing the number of outstanding disagreements, leaving the toughest problems for resolution in higher level talks early next year. This, he has explained, will give the negotiators time to get used to the idea of talking freely and dealing with one another, so that when the time comes for handling difficult issues, they will be more apt to solve them.

Khalil's insistence on bringing up the settlements and the concept of autonomy next week in London seems to clash with this timetable. In the past, however, public Egyptian statements of concern over Palestinian rights or Israeli actions on the West Bank have done little to hamper the private negotiations.