A U.S. District Court judge in Alexandria yesterday refused to transfer to federal court a civil suit arising from allegations that a city drug investigation was prematurely halted, saying the case must be resolved in Alexandria Circuit Court.

The suit, filed Jan. 10 by Lt. John R. Stedman, head of the police department's personnel and training division, seeks $500,000 in damages from Alexandria policeman Joseph Morrash and former police detective Charles Cox. Stedman alleges in the suit that Morrash and Cox conspired to discredit him and other city officials by spreading "falsehoods and deliberate lies" about the handling of the l984 drug investigation.

Mary Craig, the attorney for Morrash and Cox, had asked that the case be transferred from circuit court to federal court. She cited a federal civil rights complaint contained in Stedman's suit as the basis for the request.

Craig argued yesterday at a pretrial hearing that the suit is "a hot political issue in Alexandria right now" and has to be removed "from the political atmosphere" in the city.

But U.S. District Court Judge Richard L. Williams disageed. "If there ever was a case in the world that ought to be resolved in your local courts, this one is it," he said. "If you think I'm going to try to unscramble a bowl of spaghetti that involves the Alexandria police force . . . you have got another thought coming."

At a pretrial hearing yesterday on a separate suit arising from the controversial drug investigation, Williams granted the request of Philip Hirschkop, Stedman's lawyer, that charges of "abuse of office" against Stedman be dismissed.

In that suit, filed Jan. 30 in federal court, Morrash, Cox and Alexandria policeman Morton Ford charged that their civil rights had been violated by Public Safety Director Charles T. Strobel, Stedman and the city.

The suit, in which the three seek $850,000 in damages, alleges that Strobel and Stedman "engaged in a pattern of abuse of office for the purpose of serving Strobel's personal and political ends."

Showing some impatience with arguments on other motions, Williams ordered lawyers for both sides to meet outside the court to settle their differences.

Those disagreements center on whether Craig, who attorneys for Strobel and Stedman say is a witness in the case, should agree to give a deposition, and on whether tapes Morrash made of conversations relating to the drug investigation should be made available to attorneys for the other side.

Williams set Feb. 22 for the next hearing on the case.