THE CONCLUSION of the Leonard P. Matlovich case is a curious kind of standoff. Mr. Matlovich gets $160,000 as compensation for having been kicked out of the Air Force after he publicly declared that he was homosexual. The Air Force gets to keep intact its policy of excluding avowed homosexuals. Both sides win and, yet, both sides lose.

Mr. Matlovich failed in his effort to have the court declare illegal the longstanding policy of the military services that homosexuals are unfit for duty. The Air Force, on the other hand, failed to demonstrate that this policy is, or even should be ironclade. In fact, the settlement was based on judicial finding that the Air Force couldn't or wouldn't explain its own regulations prohibiting the retention of homosexual servicemen unless "the most unusual circumstances exist."

The first lesson that all the military services should learn from this rather expensive experience is that their policies and regulations have to be clear and unambiguous. The Air Force probably wouldn't have lost this case, and the taxpayers wouldn't be out $160,000, if its officials could have got their act together.

But there is a deeper lesson. For 12 years, Mr. Matlovich served the Air Force well. His homosexuality did not prevent him from getting glowing efficiency reports, the Bronze star and other awards for meritorious conduct and a war injury in Vietnam. Presumably, he could have served the Air Force well for another 12 years or so if he had not chosen to contest one of its oldest and most strongly held policies. The question the Air Force, and the other services, need to face is whether there is any logic in a policy that transformed Mr. Matlovich from being an exceptionally good airman to being an unfit one -- not because of anything he did, but rather because of what he said he was.

Perhaps the military services should reconsider their policies on homosexuals along the lines followed by the courts in dealing with drug addicts. Individuals cannot be punished for being drug addicts, but they can be punished for engaging in the acts that drug addiction requires. It is, after all, the acts -- the conduct -- of military personnel that count, not their mindsets. While such a policy might not work in all military units, it might provide a better and more workable standard in the rest of the military establishment than the "most unusual circumstances" that the Air Force was unable to explain in this case.