Conservative Rep. Charles W. Stenholm (D-Tex.), who said last week that he was "99 percent" committed to taking on House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) when House Democrats select leaders Monday for the 99th Congress, appeared ready to drop that challenge after a one-hour meeting with O'Neill yesterday.

"The question is whether a challenge would be constructive or destructive. It looks today like a challenge would not be constructive," Stenholm said after the meeting, adding that he would make a final decision this weekend.

Stenholm, a West Texas cotton farmer elected to the House in 1978, said O'Neill asked him not to run and told him that he was aware of the party's image problem, in the South especially. Stenholm said O'Neill assured him that conservatives would have a greater voice in House party councils and on key committees.

Many southern conservative "Boll Weevil" Democrats say they believe that the party suffered in the November elections because it has moved too far to the left and that O'Neill, a traditional big-city liberal, helped lead it there.

It was the second time in two weeks that O'Neill has had to soothe rebellious lawmakers. Before Thanksgiving he met with representatives among younger Democrats, who also are eager to craft a new party image, and assured them that they would have a greater voice in making leadership decisions.

Stenholm's waning interest in challenging O'Neill apparently also stems from division within conservative ranks over such a challenge.

According to sources, a majority of the Democratic Conservative Forum opposes a challenge, in large part because O'Neill, who will be 72 on Dec. 9, has said he will retire in 1986 -- a promise he repeated in his meeting with Stenholm. In addition, many of them say there is no point in fighting O'Neill because he likely will win easily.

Stenholm met with about 10 conservative Democratic lawmakers for more than two hours after seeing O'Neill yesterday, and most of them discouraged him from running, sources said. Only two of those attending told him not to back down.

Rep. Buddy Roemer (D-La.), an ideological leader of the Boll Weevils who attended the Stenholm-O'Neill meeting, said after the session that he had "urged my good friend Charlie not to run."