Bobby Knight approached the microphone like a wary bear. In the audience were dozens of reporters, a group that Knight ranks in his esteem just below referees and Puerto Rican policemen. And sooner or later he knew one of them would ask about The Incident.

"It wouldn't still be such a big deal if you guys didn't keep bringing it up," said Knight, referring to the 1979 Pan American games in Puerto Rico, during which he was handcuffed and arrested at a team practice after a scuffle with a policeman. He later was sentenced to six months in jail and fined $500 in absentia. When Knight refused to return to Puerto Rico for punishment, extradition was threatened, but the governor of Indiana promised his people that he would not let Knight go.

Knight and his history are news again this week at the National Sports Festival because he has been nominated to be the 1984 Olympic basketball coach. The selection, which must still be approved by the full U.S. Olympic Committee, surprised many and angered a few. Knight's talent as a coach has never been questioned. But as an ambassador of goodwill, he more resembles a saboteur.

"I think some people are afraid he'll create another international incident," said one of the basketball officials at this festival who thinks the selection of Knight is a good one.

Knight has never been shy. He kicks chairs, intimidates referees and does not hesitate to tell players what he thinks of bad plays even with the rest of the world listening in. On the other hand, few coaches have players who remain as loyal as his and fewer still enjoy the success he has had.

In Knight's 11 years as basketball coach at Indiana, his teams have made it to postseason NCAA play seven times. Twice Indiana has won national championships, most recently in 1981. Knight's teams are a model of fundamental excellence and team play; he is regarded as perhaps the most honest coach in the college game.

Thus, it was no surprise that he said he fully supports the University of San Francisco's decision to drop its men's basketball program, which has been troubled by alumni misconduct. The decision was announced by The Rev. John LoSchiavo, USF's president.

"I was shocked that a university president would be willing to do that," said Knight. "It was a courageous move . . . We need more presidents like him."

As America's dominance in international basketball has come under attack, the people who champion the sport have been looking much harder for winners. The loss of the gold medal in the 1972 Olympics still is spoken of with bowed heads. Since then teams in countries such as Yugoslavia and Cuba--where there are no professional leagues to drain off the mature players--have improved so much that they are a threat to win on any given day. It is close to sacrilege.

"Basketball is America's game," said Knight today. "We invented it, though I'm sure Pravda has issued releases that claim they did."

The Pan American episode was only the most dramatic incident of Knight's coaching career. He once cuffed Kentucky Coach Joe Hall on the back of the neck in front of 17,000 people. Another time when he yanked one of his star players, Jim Wisman, around by his jersey at midcourt, a picture of that was played in papers from coast to coast. Neither incident is likely to fade away.

"He is in a race now between immaturity and disaster," said one of Knight's former athletic department colleagues three years ago. Since then, although his hair has grayed, Knight has not mellowed. And his teams have stayed at or near the top of a very good college heap.

"There are always people who are going to criticize this. But they aren't basketball people. . . they are the philosophers," said Edward S. Steitz, the president of the Amateur Basketball Association-USA, which was responsible for presenting its Olympic coaching candidate to the USOC. A committee of 15 active and former coaches, including Georgetown's John Thompson and North Carolina's Dean Smith, started with a list of 37 candidates and settled on one, Knight. The vote was unanimous, but there were rumors that it took a lot of argument before that unanimity was reached.

Knight said today he was delighted with the nomination. Having won the NCAA title and the Pan American gold, the Olympics was the only arena he had not played. Privately, he told friends that after Puerto Rico he never thought he would get the chance.

Asked if his team would include two of the college game's top underclassmen--Pat Ewing of Georgetown and Keith Lee of Memphis State--Knight deadpanned, "I would hope they are available to play."

Knight has been here watching the Olympic prospects all week, but until this morning he tried to stay in the background. But that proved impossible, especially in Indiana.

If it takes a little passion to keep American basketball where it belongs, officials here are prepared to give Knight a lot of elbow room.

"They say it doesn't matter whether you win or lose, it's how you play the game," said Steitz, a white-haired gentleman wearing a blue necktie decorated with a basketball going through a hoop. "That was taken out of context.