A little over a year ago, President Carter declared a national emergency in the Love Canal area here, making its barricaded streets and abandoned houses a stark, silent symbol of lives ruined by toxic chemical wastes.

Today, $80 million in local, state and federal money later, the city of Niagara Falls says the emergency is over and that people should move back into the neighborhood around the old canal.

This has stunned former residents, who are still outraged over health tests that have not yet happened, bills that were never paid and government promises that were not kept.

But a few folks are moving back. Some never left. To them, the episode was an overblown media event that created hysteria where there should have been simple concern. Most of the lawsuits are not settled.

Love Canal, where Hooker Chemical Co. dumped tons of chemical wastes during the 1940s and 1950s, is now a prison-like compound of decaying houses, a ghost town inside a chain-link fence topped with barbed wire.

The school building that may have started the problem by breaking the old canal's clay lid stands empty on the grassy mound that covers the canal, its playground overgrown.

Everywhere, there are boarded-up windows and doors that flap wetly into dark, vandalized buildings. A family of pheasants has taken up residence in the lawns and shrubs gone wild and bushy.

Most people have been excluded since 1979 from these 235 small, one-story houses that make up the "inner ring" and "second ring" of homes next to and across the street from the old canal. Only state officials come and go to a squat brick building near the school, where machines hum around the clock, percolating groundwater through charcoal filters to get the chemicals out.

The current problems lie just outside the fence, where more boarded-up houses are interspersed with homes where ordinary families continue their lives. This is the so-called "third ring," the 558 homes and housing-project buildings two or more streets away from the canal.

It is a wrecked community, and along its looping suburban avenues there is only one issue: how much leakage from Love Canal crossed under the fence?

Washington and New York state spent $15 million to buy the homes of about 400 families who were convinced their illnesses and smelly basements proved that a lot of chemicals made the trip. The families moved out.

But Richard J. Morris moved in. After convincing his wife and two teen-age daughters, he moved the family July 1 to a three-bedroom bungalow on Greenwald Avenue, half a block from the compound.

Morris is director of the Love Canal Revitalization Agency, which runs the state-federal program that has bought 398 of the houses in the third ring. Those are the boarded-up homes. An additional 160 houses remain, and 50 of those owners have refused to move, Morris said.

His goal is to move other people back in, and he moved here to set an example, he said.

"We took a house with two-foot grass in front and boarded-up windows and brought it back to where it's a perfectly livable and salable property," Morris said. "If someone will say finally that it's safe to market these homes, it's in our interest to get them back on the tax rolls."

Morris and many others are hoping that the verdict will come from an Environmental Protection Agency study, overdue since June, of the current chemical levels in these homes. It will come with an explanation from the Department of Health and Human Services on whether the levels are bad for people, and another from the National Bureau of Standards as to whether the study is any good.

EPA is clearly taking no chances of repeating what one employe called "the Picciano fiasco" of last year.

A study by Dr. Dante Picciano of Biogenics Corp. in Houston triggered panic at Love Canal and nationwide attention when it found damaged chromosomes in some of 36 people he studied from the third ring. President Carter then declared the national emergency.

Later, some critics said the study was severely flawed in its technique, and, although equally reputable scientists defended it, the results have been under a cloud ever since.

So EPA spent $5.5 million taking chemical readings in the third ring and now plans to release its report "in a few weeks," according to John Deegan, who heads the agency's Love Canal project.

Until then, Morris and Niagara Falls will not be able to market the houses, but they are pretty confident the study will find that little danger exists. "They said they'd tell us as soon as they found anything dangerous to our health, so apparently they didn't find anything," Morris said.

Morris lives in his house rent-free as part of his salary, and former residents scoff at his move as a publicity stunt.

"It's sick," said Jo Ann Kott, who used to live three blocks away. She now runs the Love Canal Homeowners Association in absentia, having moved with her husband Robert, a DuPont Chemical Co. employe, and five children to a Niagara Falls suburb.

Kott remains bitter about the episode, citing delayed payments and continuing hassles with city fathers over old bills and grievances.

So suspicious of government is she now that she has refused to take part in a repeat by the Centers for Disease Control of the disputed Picciano genetic study. The CDC plans to retest the same 36 people in order to answer finally the question of chromosome damage.

After the first test, Kott said, she was told by EPA that she had "a little damage but nothing to be concerned about."

She is still incredulous. "I won't go through that again. No way," she said. "We've had too many bad dealings. They have to do more than promise this time."

The Kotts' former home, 50 feet from the chain-link fence, is vacant and vandalized now. Down the street some black gunk appears to be oozing from the ground around a crumpling sapling. It looks like old crankcase oil, but Kott says it smells like her basement.

A few blocks away, the fence makes a curious dogleg on 99th Street to exclude from the compound two trim bungalows that are in the otherwise abandoned second ring of polluted houses. Elva Crimmins has lived in one of those houses 27 of her 76 years, one of the first residents, and some chemicals are not about to scare her out.

"If I had to move it'd kill me," she said in her well-kept garden. "I never did believe there was a problem. Never knew anyone who got sick from chemicals." She did look for another home once all her neighbors moved out, but could find nothing decent for the money the Redevelopment Agency would pay for her current home, she said.

"So I stayed. The neighbors said I'd die if I did but now they're all crying. They've got worse problems where they are," she said. Kott and others have complained of high mortgage rates, long commuting times and family disruptions from the moves they made.

The fate of the other 135 homes in Crimmins' second ring is uncertain, since the state owns them and the city continues to think wistfully of the $50,000 in annual taxes they once brought in. The "inner ring" of 100 houses will be razed soon. Chemical levels in their basements and indoor air were scary enough that everyone agrees on that.

But chemicals have always been a fact of life in Niagara Falls, the mainstay of the economy after dairy products and before the falls themselves. Hooker Chemical, in fact, which has said all along it was not responsible for the Love Canal problem, remains the largest employer in the city and is building a new headquarters downtown.

"At first we felt that the Love Canal episode tarnished the city's name," said Mayor Michael O'Laughlin, "but the world is so fast-moving that now it's almost never asked about." Clearing the name of the third ring of houses and reselling them now is the main priority, since it could mean $200,000 more a year for his tax base, O'Laughlin said. "But that EPA study will decide all that," he added.

Just as Love Canal raised the nation's consciousness about chemical waste, it galvanized local people as well. A recent report by the New York Public Interest Research Group, a Ralph Nader offshoot, found after three years of checking that the Niagara River receives half a million gallons of poorly treated chemical waste every day from the "chemical row" of companies in Niagara Falls, sewage plants and old buried waste dumps in the region other than Love Canal.

"The river's pollution problems are far more serious and numerous than previously known," the report said.

But people have to live somewhere. At the LaSalle (pronounced here Lay-ZELL) public housing project in the third ring of Love Canal, 50 families that were either too large, too crotchety or too old to move remain in the garden-style apartments from which another 200 families moved out.

The residents point out the red-tipped test pipes, complete with padlocks, that reach down to the groundwater all over the area so scientists can sample the chemical level.

It has dropped now to the point that EPA recently listed 20 other waste dumps as more hazardous than Love Canal, with another nine about the same or worse. The agency has promised to spend $4 million from the new Superfund waste cleanup program here. That is only fitting, since Superfund was passed by Congress on wings of rhetoric that cited Love Canal as the reason it was needed.

On a more abstract level, Love Canal has pushed scientists and regulators nationwide to come up with standard ways to estimate risk from chemical dumps, since there is still disagreement on how bad the situation was.

The scholars are also trying to understand how the public and the media perceive risk, since Love Canal was probably the high water mark of public attention to the problem. Everywhere, work on toxic waste control, risk assessment and public information is justified as helping "to avoid another Love Canal."

"We surely have collected a lot of information on Love Canal that we want to share with the world," said Deegan of EPA, "but I don't think we'll ever put Love Canal behind us."