The Salvadoran government today for the first time handed out full titles for small plots of land to peasant families as part of the land reform program it is trying to convince its own people, its Army and the U.S. Congress is alive and well.

The titles, issued by interim President Alvaro Magana to 103 families, came more than two years after the beleaguered and controversial program began. Peasant leaders who attended the midday ceremony at the Presidential Palace, including some who lobbied heavily in Washington concerning what they considered attempts to roll back the reforms, said they are encouraged by Magana's actions.

The reforms still are not very healthy. They remain unloved and only barely tolerated by the conservatives who control the Constituent Assembly elected in March. Many of El Salvador's rural poor are untouched by the process, and some are seeing benefits that they thought they had won being taken away amid confusion and coercion.

With the Reagan administration obligated to certify to Congress in the next several weeks that the government here is making progress in the reforms, as well as human rights and the court cases against the killers of U.S. citizens to win congressional approval of a $100 million military aid request, a steady stream of Salvadorans and U.S. diplomats have traveled to Washington to protest or defend recent assembly actions affecting the program.

Among those participating in the debate are straw-hatted peasants, striped-pants diplomats and farm-state senators. U.S. Ambassador to El Salvador Deane Hinton is now in Washington speaking in support of aid, and Foreign Minister Fidel Chavez Mena is scheduled to travel there next week.

[In Washington, United Press International reported, House Speaker Thomas P. (Tip) O'Neill (D-Mass.) said President Reagan should suspend all aid to El Salvador because the Constituent Assembly has halted the land reform program. In a letter prepared for constituents in Massachusetts who have written him on the subject, O'Neill said the action on land reform "violates the law upon which U.S. aid is provided."]

Salvadoran commanders have been clearly disgruntled by the flap over the reforms and the new threat to their main source of backing in the war with Marxist-led insurgents that has gone on for more than two years.

The reforms were first decreed in March and April 1980 largely as a political tool in that fight. In both concrete and propagandistic terms they were intended to undercut rural support for the rebels by addressing some of the longstanding social inequities that nourish insurrection.

The reforms were also promoted by both the Carter and Reagan administrations as a kind of moral balance against repeated reports of massacres and other abuses by Salvadoran military units.

Today the peasant leaders who have recently been among the harshest critics of the new government took pains to note the "good intentions" of Magana and the armed forces, if not the rightist leadership of the new assembly. They particularly cited the handing over of about 200 provisional land titles in Usulutan province yesterday.

At a morning press conference, Jorge Camacho of the Popular Democratic Unit, a peasant organization, said Magana promised yesterday that peasant applications to buy the land they rent would be honored and receipts for them would be issued. An informal order from the rightist agriculture minister had stopped that process in the middle of last month, effectively killing any forward movement in that stage of the reform.

Camacho said, however, that his group is still concerned about former landowners deceiving peasants and forcing them off the land.

The evictions have slowed in the last week, but, according to Camacho, as many as 9,500 families have been displaced since just before the March 28 elections for the Constituent Assembly brought the new conservative coalition to power and displaced the Christian Democrats, who had begun the reform process in cooperation with the military.

The controversy started in earnest, however, on May 18 when the assembly took up a proposal by Magana to solve a technical deficiency plaguing the original decree that had given tenant farmers the right to ownership of up to 17 acres of the land they rented.

The original law, known as Decree 207, or Phase Three of the agrarian reform, barred the renting of any agricultural land under any circumstances. Magana wanted to except cotton and sugar lands for one crop cycle--up to four years. These are vital exports and few tenants with less than 17 acres rented such properties.

But the assembly expanded the exception to cover lands used for livestock and growing food grains, which is precisely what most small tenant farmers do raise. This caused both the local and international press to report a rollback of the original decree.

In the current confusion, peasants are losing their land while El Salvador is losing millions of potential aid dollars. One peasant activist complained that even if the military gives title to five peasants, another 25 to 30 are being forced off land elsewhere.

Some of the reform's strongest advocates in the Christian Democratic Party, convinced that the right wing has a secret agenda to do in the whole reform process despite its protestations to the contrary, claimed that the confusion and its consequences were planned.

Diplomats and politicians who sought to clarify the assembly's stand sometimes wound up confusing even themselves about their position on the reforms while the effect was to help kill them.

Many Army officers began grumbling about the assembly's attitude and ineptitude. One senior officer interviewed this week was irritated not only with his own politicians--"They're hurting us badly"--but with U.S. congressmen: "How could they pay attention to what an asssembly does?"

Today in the Presidential Palace there was no question about who supports the reforms.

Magana was flanked not only by his Christian Democratic vice president (the two conservatives with the same rank were not there) and his agriculture minister, but by powerful Defense Minister Jose Guillermo Garcia, the Army chief of staff and the vice defense minister.