Following 3 1/2 hours of talks between Egyptian President Hosni Mubarak and Palestine Liberation Organization Chairman Yasser Arafat today, a senior adviser to the president said, "I think the PLO is going in the right direction." The Palestinians made no comment.

Mubarak's top political adviser, Osama Baz, sidestepping issues that have caused tension in Egyptian-PLO relations, described the talks as "very fruitful" and said there were "no disagreements between them and us."

Egyptian officials reiterated their commitment to include the PLO in the peace process, but said Mubarak is pressing Arafat to take clear steps to show that he can be a responsible partner at the negotiations.

Baz, quoted today in the progovernment El Gomhuria, said Egypt sought to persuade Arafat to rectify the "ambiguous stand" of the PLO toward the Feb. 11 agreement between Arafat and King Hussein of Jordan.

The agreement envisages negotiations between a joint Jordanian-Palestinian delegation and Israel following an international conference on the Arab-Israeli dispute that would be held under the auspices of the United Nations.

Baz added that the PLO should show its interest in a peaceful solution and draw a distinction between military operations inside Israeli-occupied territories and "Palestinian terrorist operations committed abroad."

Another senior Egyptian official, who asked not to be identified, said the PLO is being requested to "move seriously on the Feb. 11 agreement." He would not discuss particular options open to the PLO, but said recognition of U.N. Resolutions 242 and 338, which imply recognition of Israel, "would be a very useful step to take."

The Egyptian-Palestinian talks, expected to last three days, follow similar discussions last week between Arafat and King Hussein.

Both Egypt and Jordan have expressed displeasure with the PLO following Palestinian actions during the past months that included the slaying of three Israelis in Cyprus, the hijacking of the Italian cruise ship Achille Lauro, and the aborted mission of the joint Jordanian-Palestinian delegation in Britain.

Although this series strained the credibility of the PLO with Egyptian and Jordanian officials, they have said privately that a weaker PLO will be more malleable as a participant in the peace process.

"A chastized PLO would be a useful thing to deal with," said a senior Egyptian official. The official added that it is important "to get it through their heads that they don't have any other options left."

Hussein is planning to meet in the coming two weeks with his longtime adversary, President Hafez Assad of Syria, who has supported radical Palestinian elements opposed to Arafat's leadership in the PLO. The meeting has been viewed here in part as a signal to the PLO leadership and as a means of cutting off any possible move by Arafat into the Syrian camp.

But officials here are quick to add that Hussein's Syrian card is not a very strong one. "If you think they Hussein and Assad will solve any fundamental differences -- no, this is not in the cards at all," said one Egyptian official.

While the PLO appears weak and restricted in its maneuverability, Egypt and Jordan also seem to be equally short on options, unwilling or unable to drop the PLO from the peace process, as Israel and the United States would like.

"Everybody would drop him [King Hussein] like a hot potato, and he can't afford that," said an Egyptian Foreign Ministry official, adding, "He's not sure at all whether the Americans would pick him up."

Hussein, on a state visit to Luxembourg, outlined his Jordanian-Palestinian peace plan in talks with Foreign Minister Jacques Poos, who told reporters later that it deserved the support of the European Community, Reuter reported.

[Poos said he told Hussein that the EC was still prepared to receive a joint Jordanian-Palestinian delegation. A similar meeting was postponed last month. Poos said he had stressed to Hussein that the PLO must renounce violence and declare its willingness to pursue a peaceful situation.]