Rep. Chalmers P. Wylie (R-Ohio) did not expect much fuss about his amendment to the housing bill.

He simply wanted to keep historic preservation disputes from snarling the popular, $675-million-per-year Urban Development Action Grant (UDAG) program.

His plan to curtail reviews, especially by the Advisory Council on Historic Preservation, was encouraged by the National League of Cities, welcomed at the Department of Housing and Urban Development and accepted by the House banking committee early in May.

So Wylie was taken back by the storm of protest from the Interior Department, national and Ohio-based preservation groups, and Rep. John Seiberling (D-Ohio), the House champion of preservation programs.

"Inadvertently," Wylie said recently, he had stepped into the middle of a nationwide controversy over two questions: How should new projects fit into old cities? And who decides?

At first the amendment brought out the hostilities between the preservation and development camps. Wylie Seiberling and key lobbyists finally worked out a compromise to be offered on the House floor. Its key provision would make cities address preservation problems before sending action grant proposals to HUD. The compromise would also accelerate UDAG-related nominations to the National Register of Historic Places and leave the advisory council's review role intact.

The last holdout was HUD. A final, tense meeting last week was required to convince Assistant Secretary Robert C. Embry Jr. and others that the compromise would not embroil them in more local fights.

Ironically, that same day HUD withdrew a $142-million UDAG commitment toward a downtown shopping mall in Pittsfield, Mass., because local preservation and pro-development factions had reached a stalemate. That shelved a project that had been regarded as a victory for cities in 1977 when the state blocked the developer's original plan for a regional mall outside town.

The wrangling over projects and turf has been intensified by a trend that all the wranglers support: the fast-growing movement to conserve cities and enhance the fabric of setteld communities.

Many preservation groups have embraced the general conservation themes. Over 650 communities now have preservation ordinances, ranging from simple landmark-labeling programs to elaborate protective codes in the District of Columbia, New York City and elsewhere.

Investors, too, have found new value in old places. The 1976 and 1978 federal tax laws, providing incentives for restoring and reusing historic structures and disincentives for demolishing them, have spurred over 2,000 projects so far.

In Boston, Seattle, Providence, Savannah and many other cities, restoration and development have been blended with great success. But problems have also multiplied as historic designations have become more economically valuable and politically charged.

One result has been a swarm of controversies such as the one over the future of Colonial Village, the 45-year-old garden-apartment complex in Arlington that a Mobil Oil Company subsidiary acquired in 1977.

A tenants' group has been seeking historic-district status for most of the project, "not to punish Mobil but to guide the development plans," tenant Brian Ford said recently.

Though Mobil has pledged to preserve many buildings, the tenants are seeking state landmark status for them. State recognition, which Mobil opposes, often leads to a National Register nomination that would bring the tax provisions into play.

Such fights have made local officials demand a larger role in deciding what should be preserved. The tax changes "have turned what was originally little more than an honor roll of historic buildings into a planning and zoning instrument" divorced from local government, St. Louis Mayor James Conway told a Senate subcommittee this spring.

Conway had a specific complaint. A historic designation covering over 60 buildings in downtown St. Louis had been launched toward the National Register by a preservation group before city officials learned of it this year. Similar problems have occurred in Lansing, Mich., Denver and other areas.

Another irritant to urban officials has been the federal advisory council, which has power to review, though not veto, any federal undertaking affecting resources on or eligible for the National Register. The council was created in 1966 to stop the destruction of historic properties by urban renewal, highway construction or other federal projects.

Preservation groups regard the council as a vital court of appeal.Many urban officials see it as a meddlesome gadfly "that likes to hold up projects and redesign them," one HUD official said.

The UDAG program, emphasizing local and private initiatives and fast federal action, has brought the council under more fire. It has been embroiled in the bitter fight over a convention center in Charleston, S.C.; in the unsuccessful effort to save Hudson's, the landmark department-store building in Detroit; in a wrangle over a mall in Wausau, Wis.; and in the politically supercharged hassle over demolition of the century-old Will Sales building in Louisville.

Robert Garvey, the council's executive director, maintained in an interview that most of the critics have missed the mark. "We seldom interfere with a well-made local decision," he said. "The trouble is that most cities are still being planned by developers."

From HUD's perspective, Embry has argued that preservationists' fears about UDAG are overblown. Over 80 of the roughly 700 projects so far involve preservation, he has said, while the conflicts, though highly publicized, have been few.

"UDAG may well be the best program in the country," Preservation Action president Nellie Longsworth said this week. "Still, it's a little curious that the Wylie amendment came along if there's so little conflict."

All sides agree that the Wylie compromise, if it endures, may be a guide for changes in the basic federal preservation programs, which are up for renewal this year. The trend toward more local control is already apparent. The big disagreement will be about how much authority mayors should have.

One observer, J. Thomas Black of the Urban Land Institute, said more cities need to learn to "map" important resources, while preservation groups should acknowledge that "there are times when a building has to give way." He warned that constant squabbles could deter developers and "kill the spark of urban reinvestment."