The guerrilla seizure of the Dominican Embassy with 12 hostage ambassadors appeared to have settled down to a routine affair amid reports today of scaled-down guerrilla demands.

Although there was no compromise in negotiations between the Colombian government and the M-19 guerrillas, well informed sources said the guerrillas have reduced from 311 to about a dozen the number of prisoners they want released in exchange for the hostages. It is also reported that the original $50 million ransom demand was reduced by an unspecified amount.

There was considerable confusion among observers here about the turn of events with both sides apparently displaying a high degree of reasonableness after a dramatic terrorist raid on a diplomat reception 11 days ago.

But Columbian officials and Western diplomats were suggesting today that the M-19 commandos may not be as "tough and disciplined" as originally thought and that events raised hopes that the embassy siege would not end in a bloodbath.

The guerrillas have so far released 24 hostages, including the ambassadors of Austria and Costa Rica. Among those still held is American Ambassador Diego Asencio.

According to U.S. officials here, the United States has urged the government of President Julio Cesar Turbay Ayala not to use force, President Carter has talked twice by telephone with Turbay but the substance of their discussion was not disclosed.

The Carter administration also is seeking to prelude any separate negotiations between the M-19 guerrilllas and countries whose envoys are held hostage, insisting that they should be released as a group.

The puzzling aspect of the embassy seizure, in contrast to similar incidents in the past, is that the guerrillas have not produced the list of prisoners they wanted released. Moreover, the guerrillas have not used their media opportunity to publicize their program or to force local newspaper to print their statements.

The third round of talks were held yesterday in a van near the besieged embassy.A government statement said that "the conversations will continue next week."

As the talks were under way yesterday, a government jet fighter buzzed the area several times and a civilian helicopter made a flight over the embassy.

Observers here expect the next week to be crucial. It is believed here that the guerrillas have "practically" dropped the money issue and that they are now mainly concerned about the prisoners' release and safe conduct out of Colombia.