Flinching from what one Senate Republican leader has called "the paralysis of confrontation," President Reagan has altered prospects profoundly for his once foredoomed budget with a series of accommodating gestures to Congress that have relieved anxious Republican leaders and posed new problems for the Democrats.

In the process, Reagan has also regained the dominant role in the budget-drafting process, which he was perilously close to losing to Congress, perhaps even to a bipartisan leadership coalition-of-necessity that could have increased Democratic leverage considerably in shaping the budget.

The budget that Reagan is scheduled to send to Congress at the end of this month will still be highly controversial, and major parts of it may be rewritten, according to congressional budget sources. But they say it is no longer guaranteed to be dead on arrival, as many lawmakers were expecting only a couple of weeks ago.

"I think the next budget will be one that will be clearly the kind of budget that the Budget Committee in the Senate can work with . . . . I think there's going to be latitude to work with," committee Chairman Pete V. Domenici (R-N.M.) said in a television interview Sunday.

What has happened over the past 10 days or so is that Reagan has bowed in important ways to Congress on defense, taxes and Social Security--not all the way, but at least enough to keep his budget from being dismissed from the start as an irrelevant ideological tract.

These moves, modest as even some Republicans consider them to be, especially in the defense area, have moved Reagan significantly closer to centrist leaders of his own party in Congress, thereby reducing the prospect of nasty confrontation within the Republican establishment at both ends of Pennsylvania Avenue.

To the extent that congressional Republicans can work once again with the White House on the budget, they will have less need to cut deals with the Democrats, which would not only have eroded Reagan's powers but could have given the Democrats a significantly stronger voice in budget deliberations.

But Reagan's gestures on taxes and defense have also moved him closer to the Democratic position and, conversely, further from some of his staunchest conservative Republican allies, who now may be the ones who are feeling left out in the cold. Howls of protest already have gone up from GOP conservatives over talk of tax increases, and some of Reagan's strongest opposition during the coming session may come from this quarter.

This has reshaped the political landscape vastly for the 98th Congress, even before it begins work in earnest next Tuesday, raising the chances for a centrist compromise that could squeeze out both the far left and the far right.

By no means, however, are the budget battles resolved in advance.

The administration's concession on defense spending, which does little more than bring Pentagon outlays in line with budget projections Congress adopted last year, has already been declared insufficient by the Senate Republican leadership, including Majority Leader Howard H. Baker Jr. (Tenn.), Finance Chairman Robert J. Dole (Kan.) and Domenici.

Baker has told Reagan he would like to see a cut of at least $15 billion in defense budget authority, an increase over the $11.3 billion that Defense Secretary Caspar W. Weinberger has said would be acceptable. Domenici and Dole have said they are not satisfied with Weinberger's plan either, with Dole suggesting that weapons systems should be examined for savings, and Domenici worrying about whether savings planned for fiscal 1984 would help much to bring down future years' deficits.

And the administration's suggestion for contingent tax increases in future years if deficits are not sufficiently reduced draws mixed reviews, even within Senate leadership ranks. Domenici likes the idea; Dole does not. Moreover, the Republican zeal for domestic spending cuts is not what it once was. While some GOP lawmakers are still demanding heavy cuts and others are suggesting an across-the-board freeze, some influential figures, such as Dole, are suggesting there may be a need for spending increases in some areas, especially programs that help the poor.

What encourages the Republican leaders more than anything else is what they perceive as greater flexibility on the part of the president, who, until he came under concerted pressure from his own staff as well as congressional leaders earlier this month, appeared wedded to a budget that would avoid defense cuts and tax increases even at the expense of $200 billion deficits. It was largely in order to reduce these deficits without another round of heavy cuts in social welfare spending--which is what Reagan appeared to have been planning--that the congressional leaders served notice that the president had to make some accommodations with Congress.

Otherwise, he faced being dealt out of the budget game. Last year, the Republican-controlled Senate Budget Committee rejected his budget, but after a decent interval of a few months. This year he faced the political indignity of having his budget pronounced DOA.

"I see more flexibility in this president now," said Dole over the weekend in helpfully joining the White House in denying reports of disarray over the budget. In the same vein, Domenici pointed to Reagan's gesture on defense spending and his embrace of a bipartisan Social Security rescue plan that includes tax increases as well as benefit cuts as signs of hope that Congress and the White House can avoid what he called "gridlock" and "the paralysis of confrontation."