When 63-year-old Harvey Cutting stood up at Town Meeting in the school gymnasium, he captured most of the divided attention of the dairy farmers along the back wall, women busy with knitting needles and embroidery hoops, a young mother nursing her baby.

Cutting, the retired road commissioner here, was explaining how this community of 1,600 could save $20,000 by resurfacing roads with oil and stone instead of hot asphalt. His listeners nodded heads and mumbled approval, playing their parts in an annual ritual of grass-roots democracy.

"It's up to the taxpayers," C. Peter Wilde, Cutting's successor and an asphalt supporter, said from the back of room. "If they feel they can't afford the best job, then it's up to them to decide."

The vote for oil and stone was 83 to 28, as members of the town's Board of Civil Authority walked down the rows of folding chairs and counted residents who stood up. Such purely popular government is the essence of Town Meeting, and it survives where the population is small and tradition goes deep.

Elsewhere in New England, Town Meeting has been weakened by balloting on increasingly complex issues or by "representative" meetings in larger towns, such as Brookline, Mass., where hundreds of voters act for everyone.

Still others, such as Derry, N.H., growing fast and unwilling to govern only once a year, have abandoned Town Meeting altogether for a mayor and council. But residents of this serene town in the Connecticut River Valley say they intend to hold on to government by gathering.

"We have the last of a true democracy," said Reita Lashway, who was up for reelection Tuesday to the Guilford school board. "We have the right to stand up and say what we feel."

This year's Town Meeting drew about 20 percent of Guilford's 993 registered voters, an average turnout for the occasion. Money was the main order of business in the 27 articles of the Guilford Town Meeting Warning -- the agenda. The warning is part of the town's 126th annual report, a booklet containing the $202,000 proposed town budget, the year's tally of births (26), deaths (10) and marriages (22) -- all listed by name -- and reports on everything from the fire department auxiliary's annual chicken-pie supper to plans for fixing up the swimming hole.

But Town Meeting is as important socially as fiscally, a get-together for residents whose farms and homes are scattered among the hills. Barbara Farnham, 71, hasn't missed one in 23 years.

"You learn what's going on in the town, and you get a chance to express yourself on articles," said Farnham, who sat on a bench outside the gym watching people walk by a table of fresh doughnuts and coffee.

Lunch was served at midday -- $3.50 per person for a huge meal of ham and baked beans, coleslaw, rolls and a vast array of homemade pies. The voters, many of whom brought their children, sat down at long tables covered with white paper where they were served by the school's eighth graders. The proceeds will finance their class trip, probably to Boston.

Guilford has a country store, a home-building supply business, a small library open four hours a week and an equally small town office. Some of the founders of the Total Loss Farm, a commune established on 86 acres here in 1968, still live there.

Tuesday's meeting drew farmers, bus drivers, lawyers, teachers, builders and homemakers, some of them lifelong residents, some of them newcomers in a place where, as one resident put it, "If you move to this town a week after you're born, you're an outsider." One of the transplants was Lashway's opponent for school board, Potter Stewart Jr., a lawyer and son of the late U.S. Supreme Court justice.

Votes were cast in red-white-and-blue curtained booths lining one side of the gym. Some townspeople voted and left. Other voters stayed to join in the meeting. The candidates wandered through the crowd, but there was no campaigning. Lashway won, 227 to 208.

"It's been an uphill fight in the sense that she's a local girl, she's an incumbent, and she is the substitute bus driver," said Stewart, who has been in Vermont since 1974 and Guilford for four years.

In earlier times, Town Meeting became New England's soap box for debate on issues such as the Vietnam war, acid rain and a nuclear-arms freeze. Lately, it has focused on more mundane matters: highway repairs and new snow ploughs. This year, Guilford voters did agree that they wanted to be notified if anybody was contemplating a nuclear waste dump here. They also told the town's three selectmen to consider a "work bee" to put up a new town garage.

The meeting wasn't adjourned until midafternoon, even though action on the school budget was postponed. Town Clerk Barbara Oles said she suspected the meeting's length was due to socializing. "I think the people like to visit . . . regardless of the issues," she said.

Students of Town Meeting deplore those who call it quaint. "It isn't quaint, it's real," said Frank Bryan, a University of Vermont political science professor. " . . . . Town meeting is not a public hearing, it's a real government that decides things."

Vermont Secretary of State James H. Douglas says it is jeopardized when treated as "a Norman Rockwell painting."

"Town Meeting isn't a covered bridge," he wrote this week in the Brattleboro (Vt.) Reformer. "It is the real Vermont. It is pure democracy -- hard, unsympathetic and totally alert to the thousand details that make up municipal life."

Here in Guilford, Barbara Farnham isn't worried about the future of Town Meeting. If we sat home," she said, "we wouldn't know what's going on."