Isolated deep in the vast Honduran rain forest, the site of recent fighting between Nicaraguan soldiers and U.S.-backed Contra rebels is far from populated areas and, for the Hondurans, a good place to wage a war.

The fighting focused on the Contras' remote main base camp area at San Andres, on the Honduran bank of the Coco River bordering Nicaragua, 140 miles east of the capital of Tegucigalpa.Western diplomats said Sunday that while Nicaraguan troops were continuing their measured withdrawal from the remote territory, several hundred soldiers from the Honduran 16th Army Batallion were finding out just how protected the combat zone is from the rest of the country.

The mountainous, 90-mile trail, at many places knee-deep in mud, is the only land route to the area. It was hacked through the rain forest by the Contras in 1986 when they moved base camps to San Andres.

One journalist hiked the length of the same trail with a contingent of Contra rebels in early February. The rebels said eight days was the fastest anyone had hiked the distance.

Military sources said they expected the troops to arrive in San Andres in about half that time.

According to Sunday's intelligence reports, by late Saturday the Nicaraguans still held some 20 square miles of territory in San Andres, including about half of the 10-mile-long string of rebel camps along the Coco River. The government in Managua has denied its forces were in Honduras.

Western diplomats said a 1,500-man Sandinista force crossed the river last Tuesday, and for the first two days knifed quickly north through the outnumbered and outgunned 1,000 rebels. The rebels did not counterattack once, diplomats said.

The diplomats said only Thursday's Honduran bombing stopped the Nicaraguans short of overrunning El Estrategico, the rebel command-and-control center, and the site of a crucial rebel stockpile that holds supplies for an estimated six months of the Contra war effort.

Until Thursday night, when the end to the forward movement became apparent, panicked rebel and U.S. officials said publicly they feared all the camps and supply dumps would be captured, routing the Contras and "decapitating" their seven-year war effort.

The Nicaraguans stopped advancing just 5 miles from El Estrategico after capturing the headquarters of the San Jacinto and Tactical Operations Command regional commands, Western diplomats said.

During their slow withdrawal through these areas, which began Friday, the Nicaraguans busily laid hundreds of land mines, insuring that the rebels will never again be able to use the camps, the diplomats said.

One month ago, a Contra field commander warned the Sandinistas "could sweep right through here and take everything."

"If they did that, we'd be wandering around the jungle farther inside Honduras looking for a place to put our camps . . . it would be a nightmare."