Adm. James D. Watkins, who as a member of the Joint Chiefs of Staff gives military advice to President Reagan, says he would subject any U.S. plan for attacking terrorists to a "moral checkoff list" in arriving at his recommendation.

Retired Army general Alexander M. Haig Jr., Reagan's first secretary of state, contends that the administration's reluctance to use force has encouraged terrorists to murder Americans.

The contrasting views of these four-star officers, given from the same podium at the Naval War College in Newport, R.I., on Wednesday, provide an insight into the conflicting military advice Reagan is almost certain to hear when he focuses on whether to unleash American power to avenge the hijacking of Trans World Airlines Flight 847, the murder of four marines in San Salvador and other terrorist acts abroad.

"We're approaching the point where such a decision will have to be made," an administration official said Friday, while indicating that nothing but contingency planning would be done until the hostages are returned or all efforts to free them have been exhausted.

The Navy, which Watkins heads as chief of naval operations, has elaborate plans in hand for bombing targets in Lebanon in case Reagan should order such retaliation for the hijacking. And the nuclear-powered aircraft carrier USS Nimitz is in position off Lebanon to carry them out. But Watkins and other members of the Joint Chiefs are much more wary than their pre-Vietnam predecessors about using the big stick of American military power.

Early in the Vietnam war, for example, Gen. Curtis E. LeMay, the Air Force chief of staff, said North Vietnam should be bombed back to the Stone Age. Last week at the Naval War College, Watkins said "we could have reduced the beautiful island of Grenada to sand" in 1983 but instead chose to use overwhelming numerical force to minimize the loss of life. In contrast to Vietnam, a war that is still a bone in the throats of senior U.S. military leaders, the public generally applauded the Grenada invasion.

Today's Joint Chiefs -- Army Gen. John W. Vessey Jr., chairman; Gen. John A. Wickham Jr., Army chief of staff; Gen. P.X. Kelley, Marine commandant; Gen. Charles A. Gabriel, Air Force chief of staff, and Watkins -- are at the forefront of the "never again" school regarding the American military marching off with no public support behind it, as was the case in Vietnam. In that philosophical sense, critics could call them "doves" compared with the "hawks" of LeMay's era.

But the chiefs who are advising Reagan know the harsh realities of trying to find and kill terrorists without killing innocent civilians and reaping a worse whirlwind for soldiers, sailors, airmen and marines who must commute unprotected between homes and jobs in turbulent cities and isolated outposts all over the world. The four marines killed while off duty in San Salvador are only the latest example of this vulnerability.

Watkins said that orders to minimize the loss of life add a "very significant ramification to a military mission" and require "large forces" to sift through the general population and "extract and excise the villain."

Since no post-Vietnam president has been inclined to send thousands of ground troops to places such as Iran, Lebanon and El Salvador to dig out terrorists from the general population -- and Reagan has shown no sign of planning to break this pattern -- the chiefs and their services must find ways to make weapons discriminate in preempting or punishing terrorist acts -- no easy job.

"We're learning," Watkins said, "but we still don't quite know how to deal with insidious problems we're faced with. We still don't know how to deal with it as a nation. How do you identify the perpetrator? How do you avoid killing innocent people? We're building up a mechanism in the western world for dealing with an ideological opposite. But we don't know how to deal with it because they win if they die and they win if they live."

Watkins, a devout Catholic, said he called a conference of civilian and military leaders, including three rabbis, at the War College last year to explore whether a moral case could be built for attacking terrorists. From that conference and introspection, Watkins said he developed a "moral checkoff list," which he will work through before making a recommendation on antiterrorist military action.

Although he did not read his checkoff list to the audience last week, in an earlier speech he listed conditions that he said "would seem to justify a preemptive yet a moral response to terrorist attacks": there must be a "just cause to believe we are threatened"; the response would be for nonpartisan reasons; diplomatic, political and economic measures were deemed insufficient and military force is "our last resort, our least favorite course of action; there must be a reasonable hope of success; we must foresee more good than evil as a result of our actions."

Watkins added in the same speech, made last year at the Naval Academy graduation, that "retribution and punishment are not part of a moral course and will not suffice as reasons to take action against the terrorist. Rather, we should act in accordance with our needs for self-defense and protection."

Haig, in taking a much harder line than Watkins on retaliation in his speech before the Naval War College last week, said "we knew" who blew up the U.S. Embassy in Beirut and who killed 241 U.S. servicemen at the Beirut airport in 1983, yet did not use military force to deter future terrorist attacks.

"We managed to snatch defeat from the jaws of victory by insisting on restraint on the part of Israel" when it invaded Lebanon, Haig said. And after not exercising military power to retaliate for the terrorist attacks on the U.S. Embassy in 1983, "it was a very short slide to the devastating attack against brave American Marines in their barracks in West Beirut. On that occasion we knew" who was responsible for the attack, Haig said. "Our action was ineffectual and incoherent."

Haig said "the success of terrorism in changing our policy, as it did in Lebanon, persuades governments that it works and encourages increased activity by all types of groups."

The former secretary of state and North Atlantic Treaty Organization commander listed "three fallacies" about terrorism that he said are "still alive and well in Washington: that terrorism lives on its own organic resources, independent of state aid; the moral fallacy that countering terrorist action, which by definition may risk innocent lives, dirties our hands; the political fallacy that concerted action against terrorism or its state sponsor somehow gives the issue more attention than it deserves."

He said the reluctance to use military force to combat terrorism for fear innocent lives will be lost "condemns us to paralysis. Worse yet, this fallacy equates the victim and the terrorists, relegating them to the same moral plane."

Reagan might be caught in the cross fire of these and other arguments as he ponders the wisdom of a military response to the latest terrorist acts against Americans.