In the wake of the hijacking of the cruise ship Achille Lauro, Yasser Arafat's Palestine Liberation Organization has suffered from a series of blunders and heavy diplomatic blows that raise questions about its ability -- and doubts about its willingness -- to participate in the Middle East peace process.

Since the cruise ship drama, which cost the life of an elderly American Jewish invalid, the PLO has found itself the object of a diplomatic full-court press by Israel and the United States. But its own apparently fumbling responses have served as well to alienate its sympathizers in Europe and even its closest friends in the Arab world:

* Jordan last night put the blame on a PLO member for Britain's cancellation of talks with the PLO that would have opened the way for a landmark meeting between a joint Jordanian-PLO delegation and Britain's foreign secretary.

Since February, Jordan and the Palestinians have sought to have such a group received by western leaders and have hoped that a U.S. representative would be persuaded to talk with it as well.

But yesterday's meeting in Britain was called off when one of the two PLO representatives refused to sign a statement, which Britain and Jordan said had been previously agreed upon, renouncing terrorism and violence and recognizing Israel's right to exist. King Hussein said today that the one PLO official "was not aware apparently of the details" of the statement that had been negotiated by Jordan on the PLO's behalf.

* Under pressure from Washington, the U.N. General Assembly yesterday dropped a move to invite Arafat to participate in its 40th anniversary commemoration.

* The European Community has ruled out a meeting with the joint Jordanian-PLO delegation and at the same time said it will receive Israeli Foreign Minister Yitzhak Shamir at economic talks on Oct. 22.

* Officials in Egypt, which has worked hard to bring Arafat into the moderate Arab camp, today privately expressed deep disappointment at the PLO's performance in London. They also remain suspicious of its role in the Achille Lauro affair.

Egyptian anger at Israel and the United States for their actions this month continues strong. Officials here are hoping for some move from Washington that will again give the peace process momentum.

But Egypt is also incensed about Arafat's actions in the confused hours after the hijack ended, when U.S. fighter planes forced the landing in Italy of an Egyptian plane attempting to deliver the terrorists to Arafat's custody.

The PLO leaders "make a decision to do something and then when it comes to the crunch they shy away," said one senior Egyptian official, referring to general dealings with the organization. The official, who asked not to be named, said, "It's one step forward and two steps back."

The official said Egypt is well aware of the complex political constraints on Arafat within his own organization. "Very often within the PLO the right hand does not know what the left hand is doing," he said.

But asked what the PLO could do to improve the current situation, he added, "Act responsibly."

Although the Egyptians say they remain uncertain as to whether the PLO was directly involved with the Achille Lauro hijacking, this official said he would like Arafat's people to be "categorical about not doing a few things, things that you can't control. If you have certain factions acting in the name of the PLO, don't get mixed up with them."

Most accounts of the hijacking suggest it was the work of Mohammed Abbas' Palestine Liberation Front, a component of the PLO coalition, which had intended to land commandos as tourists from the boat at the Israeli port of Ashdod. Reports from Italy suggest the young terrorists were discovered before they could carry out the plan and decided on their own to take over the ship.

After Egypt made the decision to hand the hijackers over to Arafat for trial, only to have Tunisia refuse them permission to land there, officials here tried to contact the PLO chairman. But by then he had left Tunis for Dakar, Senegal.

Right now, Arafat would have a lot of questions to answer if he came here, the senior Egyptian source suggested, such as: "Where were you? Why did you have to go to Dakar all of a sudden? That's a good enough question."

As the Egyptian plane was waiting for instructions, the United States intercepted it.

Although Arafat has been written off many times, militarily and politically, over the years, he has always returned to center stage and is still seen here as a necessary partner in any Middle East settlement.

"If you want to have a peace process you have to have the PLO with you," the official said. "They are an unruly bunch, but because you have to have them, do you give up? You have to have them on the bandwagon."

But the official said that "you can't deal with the PLO on a longterm policy. Unfortunately you have to deal with the PLO on an ad hoc basis."

Israel, meanwhile, is plainly delighted by the turn of events. "Politically speaking, this is the biggest blow the PLO has ever received," Foreign Ministry spokesman Avi Pazner said in Jerusalem today. "I think one could compare what happened to the PLO as a political defeat like its military defeat three years ago" when Israeli troops crushed Arafat's conventional armed forces in the invasion of Lebanon and forced them to leave.

Pazner described Arafat's recent setbacks, particularly in London, as "a milestone and even a turning point in our struggle against the PLO."

There are worries among many Egyptian intellectuals and officials, as well as moderate Palestinians here, that Arafat's loss may be gains for still more violent and unpredictable elements in the complex Middle Eastern equation.

While Arafat is held responsible for many of his own mistakes, Israeli and U.S. pressure on his organization and refusal to deal with him since he joined Jordan in the peace initiative eight months ago are still seen here as a dangerously blind policy.

Egyptian and Jordanian disappointment in the recent turn of events is compounded by the feeling here that before the Oct. 1 Israeli raid on PLO headquarters in Tunisia and the Achille Lauro affair, Egyptian President Hosni Mubarak and Hussein had made significant strides toward a procedural breakthrough in the peace process while visiting the United States.

Hopes raised then seem now to have fallen by the boards. "If you've got movement it counterbalances violence, but if you don't have movement the only thing left in the picture is violence," one frustrated Egyptian official said.

Ali Dessouki, an influential professor of political science at Cairo University, suggested that the United States and Israel have pushed Arafat perhaps farther than he can afford to go -- or they should want him to -- in the current peace process.

"Arafat is not only on the death list of Israel but of Syria and Libya. He has been accused of treason to the Palestinian cause, and the West has not appreciated that," Dessouki said. "The West has asked him to concede more and more. But the more he concedes, the more he loses credibility to his cause.

"It is very ironic that Arafat's adversaries now seem more correct," Dessouki added, "and by the U.S. and Israeli actions the hawks have the upper hand. Is that what the U.S. wants?"

Through more than 20 years, Arafat has built his prestige among the dispossessed Palestinian people on the basis of his commitment to "armed struggle." Often his actions have taken a form that the Israelis could clearly brand as "terrorism." Unable to reach military targets, the PLO commandos made civilians their victims.

In the past several months, in the midst of the peace process, Arafat's forces have tried repeatedly to launch operations that would be more clearly military in character.

But with access to Israel through Lebanon, Syria, Jordan and Egypt shut off, the PLO's attempts to mount seaborne operations have been dismal failures, with their vessels intercepted and their commandos killed or captured.

Although Arafat denied responsibility for the ship hijacking, the original aim of landing a team in Israel fits with his organization's perceived needs to mount a strike.