With the punch of a computer keyboard last spring, University student James Whitehead brought a hotly debated national issue to center stage at Penn State.

"Why should one kill homosexuals?" he asked in a message sent across nationwide computer phone lines.

University attorneys said Whitehead's action was protected by the First Amendment, and he went unpunished -- much to the chagrin of lesbian and gay students on campus.

Nearly a year later, a new Acts of Intolerance policy has tried to explain why incidents like the Whitehead case cannot be punished, and the ensuing reaction has prompted worry that such a policy revision implicitly advocates bigotry.

The new policy's language suggests that while Penn State remains committed to fighting intolerance, it acknowledges that bigotry itself is not a punishable offense and cannot be legislated.

It is a difficult issue to balance, University administrators admit. Where, they ask, lies the line between freedom of expression and harassment?

And, perhaps more vitally, who decides?

"You can't dictate what people think, only proscribe behaviors," said Pat Peterson, the University's assistant vice president for Campus Life.

Peterson, who spearheaded the revision of Penn State's intolerance policies, describes her interest in the free speech-harassment conflict as fervent.

Yet she, along with fellow administrators here and across the country, concedes that there are no easy answers.

When the University issued its new Acts of Intolerance policy in January --after months of scrutiny and revisions by University attorneys but with little input from students -- the move was welcomed by organizations such as the American Civil Liberties Union. But leaders of campus minority groups were less than pleased.

They worry that the move -- which they say tilts the scale in favor of their harassers -- runs contrary to the University's "United Against Racism" campaign.

"It's lending support to people who want to call a black person a nigger," said Elizabeth Walker, the president of the National Association for the Advancement of Colored People's campus chapter.

"If this gets out of hand," said Walker, a junior from Burlington, Vt., "the problems in the past are going to seem small compared to what's going to happen."

Penn State reported 103 Acts of Intolerance filed in 1989. Reports from around the nation say the same thing: Harassment against minorities -- Jewish and black students, lesbians and gay men -- is skyrocketing.

Racially motivated attacks last February provoked a week of protests by the school's black community. Some black students said they were so fearful of a hostile environment they worried even about going to class.

University officials say the statewide press generated by such demonstrations -- coupled with a dropping pool of high school graduates -- prompted a 6 percent black student enrollment decline for 1989-90.

"Big-city newspapers and the wrong kind of publicity can do a lot of damage," Vice Provost Robert Dunham said at a University Board of Trustees meeting last November.

The publicity, some say, gave birth to the University's quandary of trying to figure out where the First Amendment ends. And the issue becomes more and more urgent as Penn State tries to appeal to minority families at college selection time.

"People make decisions based upon impressions," said Gary Kelsey, the University's director of minority admissions.

W. Terrell Jones, the newly appointed special assistant to the provost who is in effect an interim minority concerns director, has targeted as his main goal the improvement of Penn State's image.

Indeed, a thick handout distributed by the University documents hundreds of individual efforts to combat bigotry between last August and the beginning of February -- both public relations moves and substantive steps.

Yet in several interviews, Jones says his concerns run much deeper than public relations, touching the lives of all students who live in a university environment.

Jones, who often uses the free speech/harassment debate as a barometer for the campus racial climate says free speech may sometimes be mitigated by what he terms "psychic violence" -- the concept that emotional abuse in many cases is as damaging as physical attack.

"People are telling us they hurt," Jones said recently. "Instead of empathizing with their hurt, we're telling them why they shouldn't hurt."

Lawrence Young, director of the University's Paul Robeson Cultural Center, has another alternative. Answers can be found, he says, by looking not to the harassers and their victims but to the large mass of "in-betweens."

"The problem lies in the willingness of the general population to acquiesce silently and maintain a sense of support for those who use this bigoted language," Young said last week.

"While it may be sinful to cast a slur, it's a bigger sin to me to stand by silently and not do anything," he said. "The burden should never fall upon the victim to condemn injustice."

The University's struggle to find an appropriate middle ground has escalated sharply in recent months, hastened by several key incidents on campus:

-- During the Fall 1988 semester, some residents of North Halls -- which has in the past been widely regarded as an area stereotyped as highly concentrated with lesbians and gay men --began sporting T-shirts with the logo "Straight from North."

They were neither sanctioned nor punished.

-- Members of Phi Gamma Delta fraternity last fall held a social function with a partially Jewish sorority during the Rosh Hashana holiday, and wore nametags which spoofed traditionally Jewish surnames.

One member wore a nametag bearing the name "Himmler," a high-level Nazi leader during World War II.

Though the Interfraternity Council suspended the fraternity's social privileges and ordered members to attend ethnic awareness workshops, the University said it could not legally punish the organization.

-- Whitehead gained statewide publicity last spring with the BITNET system message giving reasons why homosexuals should be exterminated.

"Since it isn't natural, you could surmise that these individuals are mentally disturbed or are infected by a mental illness," Whitehead wrote.

But even though University administrators decided his act was protected by First Amendment language and was permissible, they suspended his computer privileges.

Lesbians and gay men, outraged at Whitehead's act, condemned what they believed was an overly mild response by the University. But the new Acts of Intolerance policy has the potential to work both ways, one gay activist said.

"You can't agree or not agree with it," Jeff McCarty, the Lesbian and Gay Student Alliance's co-director for political affairs said when the proposal was introduced. "Whether or not you like it, that's what the (policy) is. It'll work in our favor next time."

More than any other single incident, it was the Whitehead snarl that caused the University to re-examine the language in its Acts of Intolerance statement, administrators say.

"It was an agonizing, real-life example of how these two values come into conflict," said Peterson, speaking at a recent brown-bag lunch on free speech issues.

"It also caused us to realize that it is impossible to recognize these two values through coercive tactics alone," she said.

The textbook definition of where free speech ends is the "clear and present danger" doctrine -- yelling "fire" in a crowded theater, the classic Oliver Wendell Holmes example goes. Some universities have expanded this, saying harassment is a clear danger to the victim.

But one prominent First Amendment lawyer says such limitations, by attempting to minimize offensive thoughts through suppression, hit the very minorities they attempt to protect, and are pale substitutes for cultural education.

"The one thing universities ought not to be doing is trying to stuff the cat back into the bag," said Stefan Presser, legal director of the American Civil Liberties Union's Pennsylvania chapter.

Presser unequivocally calls education imperative to help fight the cultural ignorance many sociologists and social historians attribute to the ethnocentric 1980s.

"Young people are coming to college campuses ill-equipped to deal with their own racism," he said. "American students need to be educated in the problematic history of the United States."

Robert M. O'Neil, the president of the University of Virginia and a longtime First Amendment scholar, is resigning this year to start the Thomas Jefferson Center for the Protection of Free Expression at the school.

O'Neil agrees education is an answer, and says courses that educate students about the differences between them go much farther than measures to sanction offensive speech.

Administrators here say the purpose of the Penn State policy was twofold: to issue the message that although bigotry is not illegal, it will neither be endorsed nor tolerated; and to prevent lawsuits like one that befell the University of Michigan.

"It's a catch-22," said Norman Eric Bigelow, a spokesman for the Black Caucus. "You can't censor, but you have to prevent verbal assault."

Some universities, though, have moved toward censorship to reduce the infliction of often painful, sometimes emotionally damaging ideas upon minorities.

At Tufts University in Boston, school officials created what were dubbed "free speech zones" to regulate where students could wear clothing offensive to other students.

The move sprang from administrators' reactions to a University student who wore a T-shirt listing the 10 reasons "Why Beer is Better than Women at Tufts."

But relentless campus protest prompted university officials to eliminate the zones, saying they were more trouble than they were worth.

In other cases, court action or the threat thereof has forcibly abolished university policies that stifled expression in attempts to reduce harassment.

A federal court struck down the Michigan policy last August, calling it so vague that "persons of common intelligence must guess at its meaning."

Michigan's policy had banned "any behavior, verbal or physical, that stigmatizes or victimizes an individual . . . involves an express or implied threat . . . (interferes) with an individual's academic efforts . . . or creates an intimidating, hostile or demeaning environment."