Despite a clear lack of success so far, the Israeli civil administration in the occupied West Bank remains committed to the Arab Village Leagues as the main vehicle by which to foster a "moderate" Palestinian leadership in the territory, according to the head of the civil administration.

Shlomo Ilya acknowledged in an interview that the Village Leagues, created in 1978 and supported by Israel as an alternative to the pro-Palestine Liberation Organization mayors elected in the West Bank in 1976, have gone through a difficult period and were "exhausted" at one point last year.

"The Village Leagues are very young and are making all the mistakes a young political organization makes," Ilya said in an interview in his office at the civil administration headquarters north of here.

But despite the stylistic changes he has brought to the civil administration since taking over in December, Ilya said there has been no change in basic Israeli policy in the West Bank: it remains to smash the influence of the PLO in the territory and develop in its place a Palestinian leadership willing to deal with Israel on the basis of the Camp David autonomy formula.

The announcement by Jordan's King Hussein that he will not enter Middle East peace negotiations either separately or as a representative of the Palestinians appears likely to refocus attention on the political attitudes of the West Bank's 700,000 Arab residents.

With Hussein and PLO Chairman Yasser Arafat in apparent deadlock over how to respond to President Reagan's Middle East peace initiative, Ilya and other Israeli officials hope that what they call the pro-Jordanian "silent majority" in the West Bank will now demand that Jordan take the lead in representing their interests with or without Arafat's blessing.

Israel has long pinned its hopes on this "silent majority" emerging from the shadows to accept Israel's terms for "autonomy" while breaking with the PLO, completely isolating Arafat and his colleagues.

Hebrew University Prof. Menachem Milson, one of the chief architects of the policy, argued that the only hope for a political settlement in the West Bank was to "free the population of the occupied territories from the grip of the PLO" and to "make a real effort to create conditions in which moderate Palestinians can speak out."

The Village Leagues, created, funded and armed by Israel, were to be the source of this alternative leadership. But the experiment has made little discernible progress while in recent months its guardian, the civil administration, has been going through a period of turmoil itself.

The Village Leagues were founded by Mustafa Dudeen, a former Jordanian minister of social welfare from Hebron. There are now seven separate Village Leagues, each claiming as members dozens of villages in its particular geographic slice of the West Bank.

The leagues are not governing bodies; rather they resemble loose political associations that enjoy official Israeli support. Under Milson, Israel sought to increase the influence of the leagues by giving them a role in granting various kinds of permits and development funds to West Bank residents and organizations.

The controversial Milson, the first head of the civil administration, resigned last fall. The reason he gave was the Israeli government's initial refusal to appoint an official inquiry commission to investigate the massacre of Palestinians in refugee camps in Beirut. Milson's critics, however, contend that he had fallen out of favor with then-defense minister Ariel Sharon and would not have kept his job in any case.

Milson was replaced by his top aide, Col. Yigal Karmon, until December when Ilya, a brigadier general, was plucked from the Army's intelligence service and installed in the civil administration.

Now, however, both the future of the civil administration and the direction of West Bank policies under Israel's new defense minister, Moshe Arens, are uncertain. Recently there have been press reports in Israel that the top commanders of the Israeli Army are urging that they be empowered to deport Palestinians who take part in demonstrations and that Arens is considering a reassertion of the military's role in the territory, downgrading the importance of the civil administration.

Ilya, 38, a native of Syria who speaks Arabic, has brought a different style to the job than that of the abrasive Milson and moved to reduce some of the friction between the civil administration and the West Bank Arabs.

For one thing, Ilya has halted a running feud between Israeli occupation authorities and the West Bank universities over Israel's insistence last fall that foreign teachers at the schools sign a pledge that they will offer no assistance to the PLO.

In effect, Israel has not been enforcing the pledge requirement, and Ilya said the two sides are nearing an accommodation. However, according to West Bank sources, the negotiations over the pledge have run into a snag because of the refusal of teachers who were deported during the dispute last fall to return to the territory and the refusal of other West Bank teachers to sign a new version of the pledge until the others return.

Ilya also cut from 400 to about 260 the number of Village League members authorized to carry Israeli-supplied arms.

He estimated that 20 to 30 percent of the West Bank's population supports Arafat or other "left-wing" Palestinian leaders, a figure that many Palestinians would contend is too low. But Ilya concedes that even fewer West Bankers, between 15 and 20 percent, support the ideas of the Village Leagues and that the leagues' active membership is even less.

The Village Leagues' recent troubles have included internal strife and the dismissal of the head of the Hebron district Village Leagues amid charges of financial irregularities.

Ilya blamed the Leagues' troubles not only on the opposition of many Palestinians, who consider Dudeen and his followers collaborationists and opportunists, but on skepticism of the idea behind the leagues in many segments of Israeli society.

He also decried the "workings of Arab society," which he said included "bribery as a way of life," and said the civil administration was insisting to the Village Leagues that they construct a "western-style" organization.

"Slowly and gradually we are extending the number of people who identify with the Village Leagues and the number of villages that cooperate," Ilya said. "Only now are they getting recognition in Israeli society, where people now realize the Village Leagues are an organization with new ideas."

In the interview, Ilya also expressed concern over the potential for serious violence between West Bank Arabs and the territory's growing number of armed Jewish settlers. He said he would like to see a reduction in the number of Jewish settlers who carry arms, but maintained that the Israeli Army is attempting to reduce its presence in the West Bank and there are "many places where we don't have the Army."

But Ilya rejected the suggestion that an increasing number of settlers in the West Bank will lead to a larger Army presence to protect them or more settlers carrying weapons. He said the hope was that with more Jews in the West Bank "the sense of security will be higher" and the settlers will feel less need to carry weapons.