DAMASCUS, SYRIA -- George Habash, the Palestinian radical whose name has been a synonym for terror for nearly two decades in the Middle East, rises stiffly from behind his desk and extends an atrophied right hand in greeting. On his wall hangs a small tapestry depicting the Dome of the Rock Mosque in Jerusalem.

Habash's right side is partially paralyzed as a result of a mishap during brain surgery seven years ago. He leans heavily on a pair of canes to maneuver slowly across the basement apartment before settling into an armchair.

At 62, Habash seems to carry the weight of failure on his crippled frame. His generation has failed to turn into a reality the Palestinian revolution that they proclaimed. They will see the Dome of the Rock and Jerusalem's other landmarks only in dimming memories and pictures on walls.

Habash still predicts ultimate victory over Israel. But he concedes that this will not happen in the time left to him. It will be instead for another generation, whose leadership is likely to come from the West Bank and the Gaza Strip rather than from the Palestinian diaspora that created the Palestine Liberation Organization 20 years ago.

"Israel is creating its own antithesis," Habash says. "Israel is digging its own grave by saying there is no such thing as the Palestinian people. This policy of saying they will crush the Palestinians will force the Arab people to say, 'We will not accept.'

"I will die in 10 years. By then Palestinians will be 50 percent of all the population" in Israel and Israeli-held territories. "Today they are only 37 percent. Scientifically we can show that the present situation will change in our favor."

This demographic argument is one that is much debated in Israel today. But it is striking to hear it advanced by this once fiery Marxist guerrilla leader as the core of a strategy of waiting, hoping for world opinion to change and running "operations" only inside Israeli-held territory. His recitation is a measure of how far Palestinian fortunes have fallen under the leadership of the PLO's founding fathers and the Arab rulers of the same generation.

Seen as a destabilizing threat by Arab regimes, the Palestinians have had to be controlled and manipulated as much as supported. Yasser Arafat's myopic and uncourageous political leadership and the blind fury of the terror groups that killed in the name of Palestine have also harmed the movement.

The ebbing of Palestinians' hopes is also represented by Habash's frank admission that they can never again build a "state within a state" in Lebanon, as they did before the 1982 Israeli invasion.

The key figure in current PLO attempts to negotiate a cease-fire with the Lebanese Shiite movement Amal in the "war of the camps," Habash says that a stable peace agreement would lead to "radical changes in our presence in Lebanon."

"If there is a Lebanese regime that can give us security, we must ask ourselves what do we Palestinians really want in Lebanon. To continue holding arms in the same way that was going on before 1982 is impossible. It would be very harmful.

"That does not mean we go back to the situation before 1969," when Palestinian camps in Lebanon were essentially under Lebanese control. But "we need a new formula" that "is very clear and not contrary to national Lebanese interests. We have told Amal this," Habash adds.

When Habash negotiates with Amal, he is also negotiating with Syria, which backed the Lebanese organization in its two-year war to block PLO guerrilla groups from reestablishing themselves in the camps. Syria vows to control the PLO, or to break it.

The camps war and the reaction to Syria's effort to destroy Arafat have brought a surface unity to PLO groups. But Habash's acid criticisms of Arafat's efforts "to open the road to an American solution" reflect a fragmentation of the movement that now almost certainly has gone too far for its current leaders to overcome.

The divisions reach even into the Popular Front for the Liberation of Palestine, which Habash founded in 1967. A bitter dispute over cooperation with Arafat has driven Bassam Abu Sherif, Habash's principal spokesman for more than a decade, out of the PFLP. He has gone to Algiers, where he reportedly is working with Arafat loyalists.

The painful split with the younger guerrilla, whom Habash appeared to treat as a son, was the only subject Habash would not address during the two-hour discussion. Beyond whatever pain it has brought, the separation is also an unsettling omen for the generational change that looms as the PLO's last chance.