LONDON, SEPT. 1 -- With troops and ships deployed and settling in for what could be a long siege, the crisis in the Persian Gulf has shifted into a new phase of psychological warfare, one in which some analysts here say Iraqi leader Saddam Hussein is faring surprisingly well.

On the ground, Iraq's initial military advantage is fading, its political, diplomatic and economic isolation virtually complete. But the hazier psychological war takes place in Western living rooms, on television screens and front pages rather than desert airstrips. The rules are different; the name of the game is perception and deception rather than reality, and Saddam's arsenal of potential weapons is far from diminished.

Partly from desperation and partly from calculation, Saddam has sought to turn the tables by effectively changing the subject from Iraq's invasion of Kuwait to other issues, including the fate of the several thousand Western hostages he holds. His goal, say analysts, is to spread doubt and open up fissures in the near-solid wall of Western public opinion -- to win what British Foreign Secretary Douglas Hurd calls "a second test of will."

"We are now in a phase where Saddam Hussein is trying through cat-and-mouse {tactics} to soften up Western opinion, where all kinds of people are producing all kinds of peace plans, compromises, and where there is a test of will different from the first test of will," Hurd told reporters this week.

It is a battlefield on which Saddam has some natural advantages. As leader of a state controlled by a ruthless and relentlessly elaborate security network, he has far less need than President Bush to take into account domestic opinion or to fear a popular backlash. Saddam also rigidly controls most of the ways Iraqis see and hear about the conflict, whereas Bush has limited sway over U.S. news coverage.

Saddam has many targets of opportunity. He can play off Arabs against Westerners, Europeans against Americans, doves against hawks. While Iraqi soldiers suffer and sweat in silence and isolation, the fatigue and boredom of American troops will be broadcast nightly to audiences back home.

Saddam also can count on a natural erosion over time of Western solidarity. That erosion is fed by several factors, analysts say, including anxiety over the fate of the hostages, ambiguity over U.S. war aims in the gulf and uncertainty over how quick and effective a military solution would prove to be.

"If it gets into the long-haul stage, support has to erode," said Phillip Knightley, author of "The First Casualty," a study of the press and propaganda during wartime. "People will be fed up. Their attention span is short. There's a real risk of losing public opinion, especially in the United States where people want a quick settlement."

The living-room war has at times been a bizarre mixture of images and innuendo. If last week the message from Washington and the press was a hawkish one of imminent, decisive warfare, this week it was a dovish one of peace hopes and back-channel diplomacy. Meanwhile, the American buildup continued.

An American president seemed glued to the golf course, while an Iraqi strongman donned a gray businessman's suit to speak to women and children, and a Saudi Arabian general held a press conference in the desert with a Chicago PR man at his side.

Western officials praised the impact of sanctions and cited the first signs of food shortages; TV cameras showed shelves in Baghdad markets overflowing with fruits and vegetables.

Some analysts suspect that by encouraging the present round of diplomacy, the United States is engaging in the same kind of psychological deception that Britain undertook during the Falklands War eight years ago. At that time, London took advantage of a month's lull of diplomatic maneuverings to rush its fleet to the South Atlantic for its strike against Argentine forces that had occupied the islands.

"This short week of peace-making has been useful to the generals," Middle East correspondent Robert Fisk wrote in the Independent newspaper this week. "From next Monday, the United States might just be in a position to mount a serious offensive -- as opposed to defensive -- action. . . . Then it will be time to pull out the 'War Looms' headlines again."

The hostage question is a prime example, experts say, of the way the psychological war is subtly redefining the conflict. Saddam's attempt to portray himself on television as a concerned, benevolent leader forced to be cruel by Western warmongers appeared to backfire, and his parade of captives before the cameras seemed crude, sinister and chilling.

But some analysts here believe the secondary psychological impact of Iraq's series of "Guests News" programs has been effective.

"Until recently, the hostages had no names or faces or flesh and blood -- now that's all changed," said Gregory Philo, research director of Glasgow University's Media Unit. "The more you get to know the hostages, the more difficult it is for politicians to make decisions that risk their lives. In the end, if you identify that 5-year-old boy and you know that boy is at the airfield you're going to bomb, an attack becomes an incredibly difficult thing to do.

"It's like highway accident statistics. When you read about 6,000 dead, it means nothing. But when you know some of the victims personally, it's a very different reaction."

Gradually, say analysts, the psychology of the hostage issue has made an impact. Whereas last week, Western emphasis was on the military buildup and ways of making sanctions stick, this week the focus was on how to get the hostages out: the minutiae of obtaining Iraqi exit visas and flying in jetliners, and the new obstacles that Iraqi officials seemed to erect each day. There was even serious discussion of whether British and American planes could break the U.N. embargo by flying in medicine and foodstuffs to meet Iraqi demands.

No one should be surprised at Saddam's use of television as a propaganda tool, said one Iraqi dissident who has long studied the regime. Inside Iraq, he said, Saddam's two-decade rule has been one long, televised, Orwellian event.

The ruler's pronouncements and deeds lead the television news night after night, and his frequent trips to the countryside are portrayed as dynamic, problem-solving missions. The Iraqi leader even commissioned a television docudrama of his life. The young Saddam was played by one of his sons-in-law.

"Picture him crouching around trenches in camouflage fatigues, standing erect in full parade uniform, embracing foreign dignitaries at the airport in the latest Pierre Cardin suit, handling machinery, reading the Koran . . . giving lectures on architecture and the environment, looking grim, smiling, berating officials, sucking Cuban cigars, fondling babies, dropping in on 'unsuspecting' citizens for breakfast," wrote exiled Iraqi academic Samir Khalil in his book, "Republic of Fear."

Khalil said the televised propaganda "is so bad that even some Iraqis will pretend to dismiss it; yet they bring their children up to applaud it."

Although Saddam's television performances have not convinced Western viewers of his benevolence, they have suggested that he is a more formidable foe than many had first believed.

"He is by no means the madman of the Middle East," said Jerrold Post, a political psychologist at George Washington University who has constructed a psychological profile of Saddam. "This is quite a shrewd, highly pragmatic individual of unbounded ambition who is totally unscrupulous. And he can be extremely patient."

The West has had to revise its own image of Saddam. Until he invaded Kuwait, many Western governments aided Saddam with arms, loans and food supplies during his war with Iran, arguing that he was the lesser of two evils and a leader who could be reasoned with. Now he is portrayed as a Middle Eastern Hitler.

"Yesterday's friend is today's enemy," said research director Philo. "History is being rewritten. There's a 'Nineteen Eighty-Four' feel to the whole thing," he said, referring to the George Orwell novel.

In recent days, Western leaders have begun to shy away from the Hitler analogy, in part because it underscores a dilemma they might rather avoid. If Saddam is Hitler, then the only acceptable solution to the crisis is one that results either in his overthrow or a permanent curtailment of his war machine. Yet Bush has stated repeatedly that his only goals in the gulf are to protect Saudi Arabia and force an Iraqi retreat from Kuwait.

In the secret psychological war, each shadowy move is countered by another. At the same time he insists on a total Iraqi withdrawal, Bush reportedly authorizes attempts to overthrow Saddam. Similarly, while Saddam talks of his desire for peace, he reportedly encourages Palestinian terrorist groups he allegedly harbors to unleash a wave of attacks on the West.

"There's always a big diversity in these conflict situations between the up-front public relations level and what's going on underneath -- and what's going on underneath is what matters," said Abraham Oppenheim, a social psychologist at the London School of Economics who specializes in international conflict.

Unlike some analysts, Oppenheim believes the fact that both sides appear to be stalling for time may be a sign the conflict can be resolved peacefully. "If George Bush wants Saddam's head on a plate, like Noriega's, then we may be in for a war," he said, referring to the Panamanian leader ousted in a U.S. invasion last year. "But the main thing they want is his fingers off the oil.