Defending America's Cup champion Dennis Conner set out two years ago to build a yacht faster than Freedom, the 12-meter in which he raced to victory in the last Cup series in 1980. This week he will either claim victory or admit failure.

On Thursday Conner will disclose which yacht he has chosen for his defense, and sources in Newport say there is a strong chance he will sail Freedom again.

Conner and the syndicate he is working with have built three aluminum 12-meters in their effort to create one faster than the Olin Stephens-designed Freedom. Two, Spirit of America and Magic, failed and have been cast off. Last winter he took delivery on a third new yacht, the red-hulled Liberty, and since then he and his crew have been trying to make Liberty the faster boat.

Jack Sutphen, who skippers whichever yacht Conner isn't driving in practice, said last week, "so far it's just about a toss-up," between the two boats. "If you asked Dennis today which one he's going to pick, I don't think he would be able to say."

One thing is certain: This year, facing the most auspicious foreign challenge ever mounted in pursuit of yachting's most prestigious prize, Conner is not where he wanted to be.

He "set out to beat Freedom and failed," said Jeff Spranger, editor of America's Cup Report and a veteran Cup watcher. "If they do decide to use Liberty it will be because there is no measurable difference (in performance) and political pressure will force them to use the new boat."

But Spranger noted that Conner is not one to bow to politics. "The consequences of losing the Cup is a hell of a lot more significant than bending a few people's noses out of joint who might have paid for a useless boat," he said. "The betting around town is that he'll pick Freedom."

That would put Conner in the undesirable position of sailing a yacht whose capabilities are already known to the horde of contenders.

And a horde it is.

Nearly twice as many foreign challengers are seeking the Cup this time than last, when there were four. In addition to Conner's various boats, Rhode Island Sound has been cluttered this spring with eight foreign contenders, plus the two American yachts from the Defender/Courageous syndicate that will battle with Conner for the right to defend the Cup the U.S. has never lost.

The action begins June 18 with preliminary trials between the three U.S. boats, while on separate courses the foreign contenders hold their first round-robin series.

The Americans race at the behest of a selection committee from the New York Yacht Club, which sponsors the racing. The preliminary trials are informal, as the committee watches from a viewing boat and seeks to determine the strengths and weaknesses of the three boats in the running.

In July more formal U.S. observation trials will be held, and final trials to select the defender are in August.

The foreign challengers have formal racing from the start, and their finishes against each other in the round-robins are recorded from the outset. They square off in three round-robin series this month and next, then a semifinal series in August and the final series between the two top boats runs Aug. 28-Sept. 8.

Racing between the selected defender and challenger commences Sept. 13 in a best-of-seen series, the 25th America's Cup defense.

With all the boats in the running you can't tell the players without a scorecard.

In the U.S. corner:

DENNIS CONNER is known as "the machine" for his stern and businesslike approach. Already he and his crowd of assistants have sailed more than 1,000 hours in San Diego and Newport getting the various boats ready. But still he has not found anything to beat the yacht in which he defeated Australia, 4-1, three Septembers ago.

TOM BLACKALLER AND GARY JOBSON will battle Conner in black-hulled Defender, a new boat designed by Dave Pedrick, who designed Clipper for the 1980 trials. Clipper was a good boat sailed poorly by a young and disorganized crew, but Blackaller and Jobson are veterans and have been working almost as long and hard as Conner.

JOHN KOLIUS will sail Courageous, the 1974 and 1977 winner, which lost to Freedom in the trials in 1980. Courageous and Defender are under the same syndicate and have been racing each other to hone their skills and speed. Kolius is young but experienced, a J-24 world champion. Defender and Courageous are said by observers to be about equal in speed.

In the foreign corner:

AUSTRALIA is entering three new boats in an unprecedented attempt to win the Cup. They are Australia II, with Iain Murray at the helm, from Alan Bond's Syndicate which challenged in 1980 in Australia; Advance, from the Royal Sydney Yacht Squadron, John Bertrand as skipper; and Challenge 12, from the Royal Victorian Yacht Club, Melbourne, with John Savage at the helm.

BRITAIN will pick either Victory or Victory '83, both new and both financed from the seemingly bottomless purse of banker Peter deSavary, who watched the 1980 Cup from an evil-looking black motor yacht and fell in love with the sport.

CANADA, competing for the first time in 102 years, will sail Canada 1, a new boat designed by Bruce Kirby, who invented the popular Laser dinghy. The Canadians are said to have more enthusiasm than money, and almost couldn't raise the cash to finance the effort. Their hopes were set back further when they snapped their only mast in practice recently, but a new one was soon on the way.

ITALY, entering for the first time with an infusion of money from the Aga Khan and a group of businessmen. With Azzura, a new boat, they hope to win a few races and learn enough to compete more seriously in 1987.

FRANCE, with France III, the last of Baron Bich's boats, which battled for the right to challenge in 1980 but lost to Australia. Bich is not present, having given up his fight to win the Cup after 10 years and millions of dollars spent, but his skipper, Bruno Trouble, will give it one last shot with the old boat. THE U.S. DEFENSE

Preliminary trials--June 18-25

Observation trials--July 16-27

Final trials--Aug. 16-Sept. 8 (defender named) THE FOREIGN CHALLENGE

Round-robin series A--June 18-26

Round-robin series B--July 2-14

Round-robin series C--July 20-Aug. 6

Semifinal series--Aug. 11-22

Final series--Aug. 28-Sept. 8 (challenger named)