DALAGAT, NEPAL -- While chickens and stray dogs watched, two young Nepalis faced off inside a squalid tea stall in this remote mountain village and did what would have landed them in jail six months ago: They jabbed each other with their fingers, raised their voices and argued about politics.

"The poor people want a communist system," shouted bus driver Karka Giri. "There shouldn't be big people and small people -- everyone should be the same."

"If there's a communist system in Nepal, that will be the end of the foreign aid -- everyone will leave!" yelled shopkeeper Suresh Bakta in reply.

Exasperated, Giri turned to a visitor. "My sister favors the Communists. My brother is for the Nepali Congress Party. We're fighting all the time. People can kill each other that way."

Two months after a popular uprising forced the Hindu king of this ancient Himalayan nation to relinquish absolute power, many Nepalis are still struggling to determine what their revolution was all about, and whether it will improve their country's wretched standard of living.

After years of repression and slow economic progress under the government of King Birendra, landlocked Nepal is alive with the clamor of voices unleashed by the repeal of laws against organized political activity. Hundreds of political prisoners have been released from jails, banned newspapers are back and amnesty has been granted to Christian evangelists jailed by the king, who is still officially regarded as a Hindu god incarnate.

An interim government led by the previously banned opposition parties that led the April uprising against the king now rules in the capital, Katmandu, and a committee has been appointed to draft a new democratic constitution. But the shape of Nepal's political future has yet to be defined.

Laws prescribing stiff jail sentences for anyone attempting a religious conversion remain on the books, for example, and opposition leaders are reluctant to challenge them in any new constitution for fear that they will lose the votes of Hindus and monarchists in national elections expected late this year or in early 1991.

At the same time, popular expectations for change are running high, and the victorious opposition -- led by the centrist Nepali Congress Party and the United Left Front -- is under pressure to deliver soon on the heady promises of its determined campaign for democracy. Party leaders have responded to this pressure largely by making promises.

"All the political slogan-mongering is there, but they have not said how it will be shown in a new constitution," said Lok Raj Baral, chairman of the political science department at Katmandu's largest university. "What are going to be the legal mechanisms of this new popular sovereignty?"

The biggest challenge facing the new government appears to lie in the rugged and isolated countryside, where a majority of Nepalis live in poverty, mainly dependent on subsistence agriculture. The World Bank ranks Nepal, a popular tourist destination renowned for its spectacular Himalayan peaks, as the seventh-poorest country in the world, with an annual per capita income of $160 and a life expectancy of 51 years.

The uprising against King Birendra was mounted mainly in the cities, where students and traders sympathetic to the Nepali Congress and workers organized by eight Communist parties vented their frustration over corruption in government, economic stagnation and repression by police. In many rural areas, however, the revolution made barely a ripple.

"People have heard so much about changes, but in the villages, they haven't felt the changes," said B. P. Shrestha, former mayor of a small town in the mountains east of Katmandu. "These political parties are very, very new. They have names but little else."

While expressing hope and enthusiasm about the April uprising, villagers are skeptical about whether a change in the form of Nepal's government will make any meaningful difference in the quality of their often short and brutal lives.

In Dalagat, for example, a village of 200 families situated in a gorge above the Indrawati River, residents said they doubted whether the new leaders in Katmandu would address any time soon their most pressing problems: a dearth of drinking water, roads, doctors, hospitals, fertilizer and jobs.

"There is only hope -- nothing has happened and there is no sign that it will," said M. R. Thapa, an unemployed teacher. "The party workers don't know the problems of the poor. Now they're talking about helping the people, but later we think they may line their own pockets when they have power."

Nepali Congress and Communist party workers are fanning out through the countryside these days attempting to allay the skepticism of villagers before national elections are held. If they fail, rural voters might return to office months from now the same royalist politicians who were overthrown in April.

King Birendra is widely seen as a reluctant enthusiast of multiparty democracy, and many Nepalis assume that he will seize any opportunity to reassert the powers of his palace if the democratic movement loses momentum. So far, however, the monarchist faction preparing for elections is badly split and shows few signs of organizing a serious comeback for the king.

Nepali Congress and Communist leaders are confident of their political strength, but some worry about whether they can win the loyalties of rural villagers. "After 30 years of {the king's} rule, there is virtually no progress," said Suman Koksarestha, a Nepali Congress organizer who works in mountain villages east of Katmandu. "We have to involve the villagers. We have to convince them not to expect that things will come to them."

Any government, no matter how dedicated, would require years to make a dent in many of Nepal's basic economic problems, especially in the countryside. But the new leaders already have taken one step that should lead to visible improvements soon.

This month, interim Prime Minister Krishna Prasad Bhattarai agreed with India to end a three-year-old dispute about trade and security matters that will lift severe economic sanctions imposed by India against Nepal. The restoration of full trade with India will relieve shortages of oil, kerosene and other goods that have created hardships throughout the country during the last year.