An upsurge in one of the world's longest running insurgencies, a 36-year-old struggle by the Karen ethnic minority against the Burmese government, has raised concern here about western mercenaries and an influx of refugees into Thailand.

Heavy fighting between Burmese troops and guerrillas of the Karen National Union began early this month in at least three locations near Burma's central border with Thailand, according to western diplomats, relief workers and Thai military sources.

In the latest fighting, 21 Burmese soldiers were killed and 67 wounded when about 500 Burmese troops attacked the Karens' Jerjor camp about 18 miles north of the Thai border town of Mae Sot on Oct. 11, the Bangkok World newspaper reported. It said the casualty figures were broadcast by Burmese field radio and monitored at Mae Sot. There was no information on Karen casualties in the fighting.

At least 17,000 Karen refugees have fled across the border since last year and are now living in seven camps in Thailand's Tak Province, relief officials said.

Since the beginning of this year, Karen refugees have been crossing the border at the rate of 200 a week. In September, the figure reached 1,100, and recent arrivals have reported brutal mistreatment of Karen villagers by Burmese troops, the relief workers said.

The latest upsurge of fighting has focused unusual attention on the long-running conflict because of the reported death of a French mercenary and the wounding of an Australian inside Burma on Oct 4.

According to Burmese government television, Jean-Phillippe Courreges-Clercq, 28, of Paris, was killed when about 150 Karen rebels attacked a Burmese military outpost in the Oaela area near the Thai border. The television report showed the Frenchman's body in battle dress and said he had carried a rifle, hand grenade and walkie-talkie during the five-hour battle, in which two Burmese soldiers were killed and 15 wounded.

The Australian, identified as Martin Donnelly, 26, alias Sonny Wingate, of Perth, suffered a shrapnel wound in the head and was being treated in a Mae Sot hospital. Thai authorities said he was wounded when Burmese troops attacked a Karen rebel base at Wang Kha, inside Burma about 14 miles north of Mae Sot. Four wounded Karen soldiers arrived at the hospital with him, authorities said.

Both mercenaries had identified themselves in the border area as members of the French volunteer medical organization, Doctors Without Borders, Thai authorities said. But the French group's office in Bangkok strongly denied providing any "assistance whatsoever to any mercenaries operating with Karen people along the Thai-Burmese border or, for that matter, anywhere in the world." It said it had "absolutely no connection" with the mercenaries and was "not informed about their activities."

Another of the 10 voluntary agencies helping Karen refugees, International Christian Aid, also denied published allegations here that it was involved in training Karen guerrillas.

According to western diplomats and relief workers, as many as a dozen western mercenaries have been reported fighting alongside the estimated 4,000 guerrillas fielded by the Karen National Union. So far there is no evidence that any Americans are involved as combatants, U.S. officials say.

The Karen deny that they are paying any of the foreigners, some of whom are described by diplomats as young idealists searching for a cause. Nonetheless, Thai leaders have taken a dim view of the foreigners' presence on the border because of strains in relations between Bangkok and Rangoon.

Military Supreme Commander Gen. Arthit Kamlang-ek, touring the Mae Sot area, ordered international aid organizations to recall immediately any workers who might be in Burma.

Arthit said that what relief workers did in Burma was their business and Rangoon's, "but if they go through Thailand to get there, it is our business." He said Thailand wanted to remain neutral in the conflicts between Burmese troops and insurgents.

The Karen, the largest of at least nine ethnic minorities battling the Burmese government, began their struggle a year after Britain gave Burma independence in 1948.

The Karen were bitterly disappointed at being denied their own autonomous state after having fought for the British against the Japanese during World War II. They then launched a little-reported, lonely insurgency to gain control of a homeland they call Kawthoolei, which consists largely of a 750-mile strip of Burma along the border with Thailand.

About 4 million Karen live in Burma, but it is not clear how many support the insurgency. Most are Christian, converted by missionaries in the early 19th century.

Until 1983, the Karen had managed fairly comfortably, apart from annual dry-season offensives by the Burmese, in a small chunk of their claimed homeland. Then the Burmese Army launched a series of more aggressive and sustained offensives, remaining in forward positions near the Burmese-Thai border throughout 1984.

According to relief workers, the Karen have made a new appeal to Rangoon for negotiations, but believe they have to deal the Burmese a major military reversal before the offer will be accepted.