Yasser Arafat, the mercurial Palestinian leader who has trod the wastelands of war and the fields of peace, felt right at home at an elegant Sabbath dinner here Friday night. His head table, "Gaza City," where a traditional kosher meal of matzo ball soup and pot roast was served, was decked with tangerines and oranges, the juicy, aromatic fruit of the land that has lingered in the poetic memory of Palestinians in the diaspora.

Stanley Rabinowitz, the rabbi emeritus of Adas Israel synagogue, recalled the common origins of Muslims and Jews as descendants of Abraham: "We separated, but now we are coming together." When a guest asked Arafat what he thought of a call signed by 300 rabbis for Jerusalem to be shared with Palestinians if peace required it, he nodded. "We have our holy places and they have their holy places. Some of these rabbis have come to see me," he said, raising the possibility of two capitals in one city--"like the Vatican and Rome." Sipping hot apple cider to chase the chill, Arafat held court, gallantly kissing the hands of pashmina-sheathed ladies, gliding into one of Washington's most sought after political salons, that of hostess Esther Coopersmith.

Her son, Ron Coopersmith, recalled a picnic his parents held during the Camp David talks where Egyptian and Israeli kids swam in the same pool, while their parents strained to mingle. "There was frostiness, and now 23 years later, it is just natural there is peace," he said. Almost.

So will Arafat declare a state come next September, if final status issues such as Jerusalem, refugees and borders are not wrapped up by Palestinian and Israeli negotiators? "I had the right to declare a state last May, but many friends, leaders of 68 countries I visited, told me not to do it, but I can do it in September," he answered, noting that his understanding is that Israeli Prime Minister Ehud Barak, according to the Sharm el Sheikh agreements, will approve. The agreement, however, only states that all final status issues must be resolved by then. Israeli diplomatic sources said the question is not whether the Palestinians declare a state but what kind of security ties they will be allowed to have with neighbors like Iraq, for example, and what kind of a ceiling will be imposed on the return of Palestinians.

A crisp white and black kaffiyeh pinched like an inverted V at the top, Arafat-style, draped down one shoulder over his trademark olive green fatigues, a symbolic reminder that his work is not yet done. Yet he bristled, pushing out his famous pout, when someone commented on the transformation of his image from that of a "gang leader" to one of Washington's pampered guests of state. Secretary of State Madeleine K. Albright hosted him in her Georgetown home, and President Clinton and other officials fussed over him to assure him that talks with Syria will not overshadow concern over progress between Israel and the Palestinians.

"I was not doing terrorism, I was defending Palestinian existence and the survival of my people, not the survival of myself," he chided ABC's Sam Donaldson, while taking questions after dinner from media mogul Mort Zuckerman, National Public Radio's Daniel Schorr, CNN's Bernard Kalb and Donaldson.

"If there is a will, there is a way," he told Zuckerman, who wanted to know how he is going to prepare Palestinians for an agreement in which they will not obtain everything they have asked for.

Palestinian negotiator Saeb Erekat, who translated for Arafat, said his perspective has changed. "Now when we come to Washington as negotiators, we no longer look to see if someone is pro-Israeli or pro-Palestinian. We look to see if they are pro-peace or against it," he concluded.

At a luncheon in Arafat's honor Saturday at the residence of Egyptian Ambassador Nabil Fahmy, Erekat explained that the Sharm el Sheikh agreement gave negotiators a year to conclude discussions, but "we can't wait forever." Asked if Arafat was over-interpreting by dangling the prospect of a state ahead of an agreement on key issues, an Arab diplomat observed that this was a very unusual negotiating process requiring unusual tactics. "Arafat will go on buying and selling the moral of his story until he gets there," he said.

'Serious Player' in Peace Bahrain's Crown Prince Salman Bin Hamad Bin Isa Khalifa, 30, one of the Arab world's emerging young royals, said his Persian Gulf nation of 600,000 people was the first to dig for oil and will be the first to lose it, when reserves are depleted. During a lunch with Washington Post editors and reporters, he insisted that Bahrain is a "serious player" in Middle East peace and that Syria's hoped-for agreement with Israel would be the last hurdle to peace in the region.

After a 25-year suspension of democratic life, Bahrain will hold municipal elections for the first time next December, he said. Shiite Muslim disaffection will diminish if there is economic development and the needs of the Palestinians are met, he said. "There will be less reason to complain," the prince said. He acknowledged human rights reports about abuses, carried out by overzealous individuals in Bahrain's prison system, but "not as a result of state directives." What is important, he added, is "that we deal with them."