Schools walk thin church/state line at Christmas time

School principals in various parts of the United States have been searching in recent years for ways to observe Christmas without crossing the constitutional line separating church and state.

Most have been guided by an April 1980 court decision in a case brought by a parent in Sioux Falls, S.D. On appeal, the federal appellate court in St. Louis ruled that music, drama, literature, or art can be displayed in a ''prudent and objective'' manner, and that holidays that have both a ''secular and a religious basis can be observed'' in public schools.

Last year the National Association of Secondary School Principals prepared a legal memo suggesting that the content of religious holiday programs should be secular, avoiding such religious content as prayers, hymns, carols, and readings. The National Conference of Christians and Jews suggests involving parents, religious leaders, and school officials in preparing religious holiday guidelines before conflict arises.

Medford Township, N.J., is one community that this year confronted diverse opinions head-on when it attempted to formalize its school Christmas program guidelines.

In previous years Superintendent Robert H. Salati had carefully resolved any questions himself and been upheld. But this year the Board of Education asked him to propose a permanent policy.

Before drafting Medford's guidelines, Mr. Salati met with the Fellowship of Religious Leaders of Greater Medford to review what kind of school observance of holidays they considered appropriate.

''Seriously, I've had to look at my own beliefs; I've had to learn that some holidays (St. Patrick's Day, for example) aren't as religious as I thought, while others, like Passover, have historical as well as religious traditions that make their observance in public schools justifiable,'' Salati admits.

According to Salati, staff reaction to the guidelines he drafted was ''positive.'' Copies of the guidelines sent to individuals who had voiced concern or who were presumed to have an interest.

But when the board met in November, 100 to 120 outspoken critics showed up. ''Their objections,'' Salati says, ''were primarily that they thought the recommendations were too secular.''

Medford's proposed policy would excuse children from participation in school ceremonies that are contrary to the religious beliefs of parents, but it does not forbid observances of religious holidays. It does not permit the display of a Nativity scene in a school. Teachers are advised not to announce, ''We are now going to make Christmas gifts for your parents.'' Students may bring in Christmas trees, but they are to be decorated with nonreligious symbols.

The dissenters wanted the board to stand up for a more religious observance of holidays based on religious events.

''Our community does want children to be exposed to a variety of religious beliefs,'' Salati says. ''In Medford, the board listens to the community; this has worked well for us. The decision on the guidelines has been set aside until after Christmas - not to cool down the differences of opinion, but so that we can look at this and get all the input. It never was our purpose just to listen to dissenters in a two-hour session and then go ahead and do whatever we wanted.''

''There is no federal legislation which addresses the church-state issue as it might arise from Christmas observances in public schools,'' says David Landau of the national office of the American Civil Liberties Union in Washington, D.C. ''As far as we are concerned, this would be monitored at the local chapter level. But we are watching the proposed 'prayer amendment,' which may include carol singing and religious readings, as well as prayers in public schools.''

''No question has been raised about this year's Christmas observances in our schools,'' Salati notes.

Salati describes Medford Township, which has a school enrollment of 2,708 students, as a cluster of bedroom suburbs whose residents commute to Philadelphia and New York. Pinelands, under state protection, prevent total urbanization of the 42 square miles in the township, so much of it is rural in character.

''But definitely we are a pluralistic community,'' he maintains. ''We have children from 12 different countries in our schools - from Europe, Asia, Pacific Islands.''