A friendly, 24-year alliance between the National Endowment for the Arts and New York theater producer Joseph Papp collapsed in bitter enmity last month after an acrimonious exchange of letters over the issue of obscenity in the arts.

At the end, Papp had spurned nearly $748,000 in federal grants and accused NEA chairman John E. Frohnmayer of betraying the arts community in a futile attempt to "appease the fanatical zeal of the religious right."Frohnmayer accused Papp of "inexcusable and self-serving" behavior in rejecting the NEA grants to protest a congressional ban on federal support for arts projects that might be deemed obscene.

Papp, president of the New York Shakespeare Festival, fired his parting shot in a Nov. 15 letter asking how Frohnmayer intended to implement new legislation thatdropped the obscenity ban but requires the NEA to consider "general standards of decency" in its grantmaking decisions.

"Your past record provides little assurance of an arts atmosphere free of subtle and not-so-subtle intimidation," Papp wrote.

Copies of the private, seven-month exchange of letters between Papp and Frohnmayer were released by NEA headquarters in response to a Freedom of Information Act request by The Associated Press.

In separate interviews, Frohnmayer and Papp made clear that neither was in a hurry to heal their breach.

"If we can restore relations with Saddam Hussein, anything is possible," Papp said in a telephone interview from New York.

"I suspect they'll come back at some point," Frohnmayer said, "but I don't propose to do anything about it myself."

Papp's battle with the NEA under Frohnmayer's leadership coincides with serious financial problems at the New York Shakespeare Festival, which Papp founded in 1954. Earlier this month, Papp announced the festival will lay off 30 of its 123 employees at the end of the year to save about $750,000.