William Sylvester is the genuine article, a "midnight dumper" convicted of unloading tons of chemical waste off Gilson Road here, enough to create a seven-acre oval of poison capable of polluting 800 million gallons of groundwater.

But Sylvester, 60, a gruff and beefy fellow, is bitter and unrepentant. He says all he dumped in his gravel pit was "wash water" and that someone is getting rich mopping it up.

His reference is to the $2.3 million the federal government is preparing to spend to contain that "wash water," which federal officials call a festering sewer of 133 or more chemical compounds oozing along through the groundwater below Sylvester's gravel pit.

The site off Gilson Road has become the nation's current No. 1 priority cleanup site, the first in the country to get money from the new federal "Superfund" that was set up last year to tackle abandoned toxic waste dumps.

The Nashua site is not very spectacular to look at, but it is about as deadly as the bubbling heaps of leaking metal drums in New Jersey and Kentucky. It is also a lot more typical of the thousands of dump-sites awaiting attention nationwide: a forlorn expanse of trash boxes, rotting trees and scrubby fill surrounded by a high, new chain-link fence.

The disaster is underground, where the seeping wastes have contaminated 800 million gallons of groundwater, said David Campbell, a Democratic state legislator who is legislative aide to the mayor of this town of 67,000. "You name it, it's out there and combining with itself to make things you've never seen before."

The Environmental Protection Agency, which has been working here since March, 1979, is planning to contain the chemicals in a sort of underground clay bathtub.

Carl L. Eidam, an emergency coordinator out of EPA's Lexington, Mass., regional office, says workers will put clay walls clear down to bedrock -- as far down as 80 feet in some places -- and cover the site with a clay cap. They will avoid a massive excavation pit by using a slurry injection technique, replacing each steam shovelful of earth with a clay slurry that will harden.

The work is expensive, and New Hampshire officials say they could never manage the cleanup without the new Superfund, named for the $1.6 billion size it will attain from chemical industry taxes levied over the next four years under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). They only wish they could get more help for New Hampshire's other sites.

But they know they are lucky. Superfund has had many problems getting started, and current budget fights aren't helping much. The fund is already surrounded by controversy, some of it over which federal agencies will work on the cleanups and how much more a state can ask industry to do than the federal government already requires.

With budgets dwindling at every level, no one knows how many people will be available to do the cleanup and how clean will be called clean enough.

The 1982 budget contains $200 million for Superfund, down $50 million from 1981, cutting the preliminary investigation capability from 1,300 sites to 900. President Reagan's additional 12 percent 1982 budget cut will hold back $24 million of that. Leaked EPA proposals for 1983 call for $275 million and a beefed-up staff, but there is still only an acting director.

Federal guidelines on how to deal with the sites are a year away, so Gilson Road is being handled according to tentative rules that could change under lawsuits challenging the holdup. That makes for tension among local, state and federal workers, trying to cooperate in the complex cleanup even as they battle over budgets in every other field.

Gilson Road is fairly typical in that the neighbors always thought something fishy was going on there. When William Sylvester opened it in 1973, taking in construction rubble, no state permit was required. "Then they said I had to get a permit but I kept going, so they kept trying to close me down," he said. He was jailed several times for contempt of court.

After 1976, huge 18-wheel tank trucks would rumble past Doris Thompson's house down the road at night and back into Sylvester's squat, white cinder-block warehouse, their tanks sagging low to the ground.

The doors would close for a while and then the trucks would come out riding high, apparently empty. City police detectives hiding in the underbrush followed the trucks in 1979 "all over Massachusetts and Maine one weekend, picking up chemicals all over and bringing 'em back," said deputy corporation counsel Robert Sullivan.

He said that when police opened the warehouse, they found a makeshift drainpipe made of welded 55-gallon drums leading from the floor of the building down into the gravel. "I don't know how that got there," said Sylvester.

He also knew nothing about 1,300 drums full of chemical waste that were found in one corner of his land in 1979, drums New Hampshire spent $200,000 to remove.

What he did know, he said, was that he allowed just 22 tankers to dump loads of chemical-vat "wash water" into his landfill. "Don't call it nothing else, now," he said.

Sylvester served six months in New Hampshire's Grasmere jail on conviction of illegal waste dumping, and another six months in Massachusetts, where, he said, "I was caught helping some guy unload two truckloads of barrels." The colleague is still in prison.

Sylvester, who says he's earning a meager living now hauling scrap iron, still says he was innocent of toxic waste dealing. "But I can sure understand how some people might be tempted. Those companies got so much damn paperwork to go through now that they'll pay anything to get rid of the stuff."

He referred to the manifest system and the cradle-to-grave waste tracking procedures set up, but still barely put into effect, under another toxics law, the Resource Conservation and Recovery Act of 1976. The Reagan administration is currently rewriting all the RCRA regulations to ease that paperwork burden.

Environmental groups worry, though, that the new rules will be too loose to keep the trucks from detouring to some other Nashua in the future.

The initial dumpings off Gilson Road, like most wastes nationwide, were ordinary enough: the slop from printers, textile mills, paper processing and shoe factories, as well as from chemical companies, Sullivan said.

Superfund operates on the assumption that most sites are like that, and an EPA count says there are at least 9,600 old dump sites simmering away nationwide.

But there are three problems:

Superfund cannot possibly deal with all of them because cleanup is so expensive.

It must try to deal with at least one site in each state because of pork-barreling when the law was written. That means that the No. 2 site in industrial New Jersey may not get Superfunding until the blackest pit in, say, Wyoming, is taken care of.

It bars states from taxing industry any further to set up their own funds, meaning that industry-funded programs in New Jersey, California, Michigan, New York and Ohio cannot be used. The states must rely on their own dwindling general funds to keep the cleanup going. New Jersey is challenging this provision in court.

Pressure on EPA to spread the money around led to an internal proposal that the agency do the bare minimum at each site, using cost-benefit analyses to clean up to some point less than the health standards set by the Clean Air Act and the Clean Water Act.

Environmental groups oppose this option on grounds it would give people a false sense of security while the dumps remain health hazards. EPA argues that the final cleanup can be done by the states, which must pay 10 percent of the bill in any case.

Meanwhile, Ralph and Mildred Cullinan look at the little brook that edges their large trailer home lot behind the Gilson Road site, and say they don't care who pays for cleaning it up, as long as it gets done.

The underground chemicals are just beginning to seep into the stream, and the EPA's Eidam expects fully 1 percent of the water to be chemicals by the end of this year before the containment wall is finished.

A fence is to go up along most of the stream this month, beginning with the part that flows through the trailer park recreation area. Cullinan, a 67-year-old retired airline mechanic, practices his golf game there.

But no city, state or federal notice has ever formally warned the Cullinans that there might be any problem. When state workers began drilling their test wells in his back yard two years ago, Cullinan recalled, "I asked if I could irrigate the lawn with the water. They told me I shouldn't because I'd have to walk across the lawn into the house."

This year, he said, he asked another worker if he should wear a face mask in the yard. "She said, 'Not yet,' " he reported.