Like a wise old Indian chief, Anwar Sadat makes powerful medicine. Just listening to him talk out his prescription for peace in the Middle East at a luncheon meeting of the Council on Foreign Relations here the other day, you had to believe.

You had to think that, yes, somehow, it could work out his way. Part of it, of course, is the contagion of his intense commitment, the disarming candor, the mesmerizing charm. The assembled businessmen, academicians, journalists and some leaders of the American Jewish community were not supposed to be soft touches.

But the record, overflow attendance on a Friday afternoon in August, the standing ovations, the warmth of the occasion--there was in all of it something very close to hero worship. The force of Sadat's personality, then, has much to do with his self-evident hold on American public opinion--and on those who claim to shape it.

But the force of Sadat's argument, and his example, has much to do with it as well. The spell may pass. But my hunch is that one way or an other the man who had the vision and daring to change his own policy radically--to make the big breakthrough in Jerusalem--may wind up working some sort of wonders on Ronald Reagan's policy.

The Palestine Liberation Organization's ultimate inclusion in the peace process could be for Reagan, in a sense, what the China opening was for Richard Nixon--one of those unthinkable about-faces that Republican presidents, more so than Democratic presidents, seem uniquely able to execute.

This is not to suggest that Reagan will do what Sadat was publicly requesting in Washington: abandon the commitment to Israel "which prevents the United States from contacting the PLO." Sadat knows the domestic political forces, not to mention Reagan's convictions, make that a non-starter.

So why ask? Because Sadat's "building block" approach to diplomacy begins by defining differences. Merely by asking, he opened up a clear difference between American policy and that of Israeli Prime Minister Menachem Begin, whose reflexive reaction was predictable: "I will tell my friend Anwar, 'I disagree with you completely if you try to bring into the negotiations that murderous organization."

Begin would negotiate with West Bank "Palestinians," he said, but "not, under no circumstances whatsoever, with the so-called PLO."

Secretary of State Haig was by no means so categorical. He said the requirements for PLO participation are that it accept United Nations resolution 242 (and a related resolution 338), which fixed the general guidelines back in 1967 for a Middle East settlement, and that the PLO recognize "the existence and right of Israel to exist."

Fair enough, Sadat said more than once in the course of his visit. The administration will be talking to other Middle East dignitaries in coming weeks; it will need time to develop a more comprehensive policy. For now, Sadat doesn't even want to quibble about the difference between the PLO and "Palestinians;" Arab leaders on the West Bank, he noted, are members of the PLO. But he is firmly convinced that the PLO will somehow have to be brought into the next phase of the Camp David process--the so-called autonomy talks to determine the fate of the Israeli-occupied West Bank and Gaza Strip. And there is good reason to believe that he will be working on this problem from the other end, trying to nail down the PLO's terms.

Egyptian officials insist that PLO chief Yasser Arafat is not all that far from meeting American, if not Israeli, requirements. Sadat attaches enormous significance to the Lebanese cease-fire and to Arafat's public concession recently that he "accepted ceasing fire through the Lebanese border."

Sadat admits he has no relations with the PLO: "They abuse me." He may be reading Arafat wrong and putting far too much weight on a tenuous, third-hand cease-fire agreement that may not hold up. But he asks, rather persuasively: "Why not build on it?"

For any serious building, the Egyptians are quite aware that both the PLO and Israel will have to change their policies. But Sadat is also aware, given the hatred and distrust on both sides, that neither can be expected to make the first move.

So what Sadat has in mind is an exercise in choreography--the arrangement by interested parties of a sort of minuet. The key words in the Sadat formula for inducing Israel and the PLO to deal with each other in a way that would allow them to define and negotiate their differences are "mutual and simultaneous," with the stress on simultaneous. The timing of the bows, each to the other, in this minuet has to be just right.

It won't work without firm American endorsement. Some say it won't work at all--or at least on Menachem Begin's watch. But the same was said about Jerusalem. As Sadat inches closer to the full fruits of Jerusalem-- the final recovery of all of Egypt's Israeli-occupied territory in the Sinai desert--that will be his argument, with the Arabs in general and, for what it may be worth, with Yasser Arafat.