In this middle-class, unusually well-integrated community, they are still talking about the murder of 14-year-old Marcy Conrad, "a sweet girl," and the young people who kept it a secret.

Conrad was strangled Nov. 3 and dumped into an oak-lined gulley near a popular lover's lane in the hills outside town. For at least a day her 16-year-old boyfriend, Anthony Jaques Broussard, bragged of raping and murdering Conrad and took friends from Milpitas High School to see the body. For at least a day no one reported it.

Dave Lefler, 16, and an 18-year-old friend, Mike Irvin, notified police after hearing the story from friends and going to see the body. Their action has made them the heroes of the tragic incident that has brought Milpitas nationwide headlines and several days of intense self-examination. But in the view of some of their peers, they are villains--violators of a code of teen-age loyalty that, in combination with a fear of police blame, kept the others silent.

Lefler heard voices outside his screen door one night about a week after he reported the body to police. "He's going to pay for what he did to Jaques," one voice said.

Lefler said he persuaded the two young men at his door to leave: "I got a .22 shotgun and pointed it at the door. They could see it through the screen and they took off."

Lefler, a slight youth with bushy hair and a wispy mustache, cannot be called a model student. His left arm is bandaged from a knife wound he received in a recent fight unrelated to the murder. But he still wonders what made at least seven or eight of his fellow students who saw the body keep silent. "A lot of them were pretty good friends of mine, and I was kind of shocked," he said.

Publicity about the case has suggested a group of heartless children with little respect for life--a "Lord of the Flies" replayed in suburbia. Sheriff's Sgt. Gary Meeker said, "I have never seen a group of people act so callous about death in my 15 years of police work." One friend of Broussard, Kirk Rasmussen, 16, allegedly covered the body with a bag of leaves, and as a result has been arrested as an accessory. One girl tore a radio station decal off Conrad's jeans, which had been discarded along the roadside with other articles of clothing.

But talks with students here suggest the problem for many was not callousness, but fear and confusion. They were young people afraid of the police and without much guidance in how to balance loyalty and justice, how to confront an act of madness. One student who saw the body said he went home and stared at the ceiling all night.

Rasmussen was on the verge of tears when he told a San Jose Mercury News reporter before he was arrested, "I couldn't do my classwork. It was on my mind. I couldn't believe it." He said at one point he asked Broussard why he did it. The 6-foot, 4-inch, 280-pound junior, reportedly emotionally disturbed since age 7 when he found his mother dead of natural causes in the shower, just laughed at Rasmussen.

"I think they were pretty scared to go to tell the cops, because they would be blamed somehow," Lefler said.

"I just didn't want to get involved," said Robert Engel, one of Lefler's friends, who refused to accompany him to the police. Engel declined to discuss the incident further, other than to say, "I don't think it's fair that they blame all 1,600 kids at Milpitas High for it."

Parents, the city manager, and the school superintendent in this town of 40,000 see nothing special about Milpitas that could have caused the incident.

Incorporated only 27 years ago, Milpitas was from the beginning a carefully planned suburb whose unusual racial harmony has been attributed to the influence of the United Auto Workers and the Ford Motor Co. plant, then the town's prime employer. Today its economy, like that of neighboring San Jose, has become heavily influenced by the booming science and technology companies of the south San Francisco Bay area.

Conrad was white, Broussard is black, most of Broussard's protectors are white, and race appears to not to have been a factor in the case.

Peter Mesa, the 52-year-old school superintendent, argues that the tragedy could have occurred in any community where hard-working or divorced parents have difficulty communicating moral values to children and where a few teen-agers develop their own code of not informing, or in the words of several Milpitas youths, not "narcing" on their friends.

Mesa said he will recommend a statement be added to the student handbook reminding students they are "expected and required to report without fail any action that may affect the safety, welfare, property and rights of others."

John Maltbie, the 34-year-old city manager, endorsed the idea but added, "I don't think it's the school's responsibility" to impart the necessary values. "It's the parents' responsibility," he said. "Maybe in our society we need to help people be better parents."

According to accounts by police and some of Broussard's friends, Broussard strangled Conrad at his father's house after an argument dealing with either sex or remarks Conrad had made about Broussard's mother. He threw her body into his father's pickup and dumped it, clad in only a brown tank top and white socks, into the gulley.

Broussard told some of his friends he had raped her; an autopsy report on possible sexual assault has not been released.

Broussard talked about the slaying the next day. During the next 24 hours he took at least three groups of people to see the body. Irvin, an oil company employe, and Lefler heard about it from John Hansen, 16, who had been on one of the trips. Somewhat disbelieving, they rode in Irvin's car with Hansen and Engel to see for themselves.

Some students, hearing the rumor, suggested it was a mannequin, "but when I slid down the hill and looked at it, it was obvious it was a real body," Lefler said. "Mike lifted up the plastic bag . . . . She was white and stiff, but she was real."

Irvin, whose family said he was declining to be interviewed, has told friends if he had to do it again he would have reported the body by telephone, anonymously. But he went inside the police station while Lefler waited in the car, then Lefler was called in to make his statement.

A court hearing Dec. 15 will consider if Broussard is to be tried as an adult. He and Rasmussen are both in Santa Clara County Juvenile Hall, and police say none of the other teen-agers is likely to be charged.

An assistant district attorney said it is not a crime to fail to report a body or a murder, only to harbor a murderer or actively impede a probe.

Lefler shrugs off the youthful code of silence. He noticed a quote in a local newspaper by a 16-year-old named "Charlie" who said of Irvin, "He don't live by any code or nothing. Jaques is a partner of mine. He needs help. He's gone wacko. But I wouldn't narc on him. He would have gotten it sooner or later." Lefler said he tracked down "Charlie," and extracted an apology.