Correction Appended

PURCHASE, N.Y., May 29— Almost 25 years ago, the director Harold Prince pushed Broadway a significant step forward with ''Cabaret,'' a show that folded Brechtian storytelling, abstract theatrical metaphors and the history of Nazism into the sophisticated glitter of a mainstream Broadway musical. In ''Kiss of the Spider Woman,'' his first musical since ''Phantom of the Opera,'' Mr. Prince reunites with John Kander and Fred Ebb, the composer and lyricist of ''Cabaret,'' with far more radical ideas in mind.

''Spider Woman,'' an adaptation of the 1978 Manuel Puig novel that also inspired the 1985 film with William Hurt and Raul Julia, is the first large-scale American musical told from an unapologetic and unsentimental gay point of view. In Terrence McNally's script, the entire narrative is seen through the eyes of Molina (John Rubinstein), a homosexual window dresser incarcerated in a Latin American prison, while the perspective of his cellmate, a political prisoner named Valentin (Kevin Gray), is reduced to the barest essentials. ''Spider Woman'' isn't shy about taking chances. It depicts torture with the grueling ferocity missing from Mr. Prince's ''Evita,'' has a morphine-fueled dream sequence of dancing hypodermic needles and simulates an involuntary act of defecation. The evening culminates with the image of its title, a blood-spattering kiss of death.

The show is the first offering of New Musicals, a production company that has announced a season of four new American musicals at the State University College here. New Musicals informed the press that its attractions are works in progress and asked that drama critics not review them. ''Spider Woman,' however, is presented to the audience as a full-dress commercial production rather than a workshop.

If anything, the tragedy of ''Spider Woman'' is that New Musicals, which describes itself as a ''new Broadway'' in its promotional literature, has not allowed the work to develop slowly in a laboratory staging, as nonprofit, Off Broadway companies have helped develop adventurous musicals like ''A Chorus Line'' or ''Sunday in the Park With George.'' Instead, ''Spider Woman'' arrives already burdened with the full, and in this case crushing, weight of Broadway extravagance. It is as overproduced as other seriously intentioned Prince musicals of the past decade like ''Grind'' and ''A Doll's Life.'' But unlike those failures, ''Spider Woman'' has the kernel of an exciting idea, and it also has, in Mr. Kander and Mr. Ebb, superb, if often underrated, songwriters who are clearly hungering to rise to a challenge.

The show's potential virtues are being held hostage by a staging so overgrown that major esthetic reconsiderations, as opposed to cosmetic nips and tucks, are already foreclosed in this production. Though the musical's story is fundamentally an intimate one about two people - men of opposite sensibilities who teach each other about self-respect and self-sacrifice while in captivity - it is often difficult to find Molina and Valentin within the bloated trappings. As in its other incarnations, this ''Spider Woman'' intersperses its grim prison scenes with Molina's campy recounting of an old, fondly embroidered Hollywood movie that is his imaginary escape from present despair. But in this case, the fantasy film - here fittingly changed to an old movie musical - overwhelms the reality so completely that the compelling story of Molina and Valentin seems a mild, often incoherent intrusion.

Part of the problem may be endemic to Prince musicals that follow the ''Cabaret'' format of alternating realistic scenes with show-biz production numbers that comment thematically upon them. As recent revivals of ''Cabaret'' and ''Follies'' have demonstrated, those musicals' ironic cabaret and vaudeville turns hold up far better than the realistic scenes they are meant to annotate, and ''Spider Woman'' shares that shortcoming. Yet the new show has a graver defect: the lengthy movie-musical sequences of Molina's fantasies have only a nominal and repetitive relationship to his jail-cell reality. In contrast with the Joel Grey numbers in ''Cabaret,'' the glitzy routines of ''Spider Woman'' detract from, rather than enhance, the work's dramatization of fascist repression.

Though Mr. Kander and Mr. Ebb have written some typically amusing parodies for their movie musical, even their better numbers are defeated by the routine choreography of Susan Stroman and by the performance of Lauren Mitchell as the star of Molina's celluloid visions. What is needed in this role is not, perhaps, a mysterious reincarnation of Rita Hayworth (which is what Sonia Braga brought to the film version) but a dazzling musical-comedy presence of the Chita Rivera sort who has always ignited the flashiest Kander-Ebb songs. Ms. Mitchell has neither the personality nor the vocal authority for the task.

The casting of Molina and Valentin is even more damaging. The window dresser now sounds remarkably like the opera fanatic played by Nathan Lane in Mr. McNally's ''Lisbon Traviata,'' and Mr. Rubinstein, not a natural comedian, pushes himself so hard that he crosses the line into retrograde gay caricature. Worse, his singing range is now so narrow that he cannot be given the big emotional arias that his character must have, and that Mr. Kander and Mr. Ebb are prepared to write, as they demonstrate in a haunting early quartet. Without those songs, Molina becomes an outsider in his own story. While Mr. Gray's Valentin has a stronger voice, his character remains, in writing and performance, too vague to fill the vacuum, a poster-flat radical who looks like Che in ''Evita'' and sings an anthem, ''The Day After That,'' as generic as ''One Day More'' in ''Les Miserables.''

By evening's end, when Molina and Valentin are supposed to be achieving a redemptive symbiosis, the male stars hardly seem to have met each other. Instead of concentrating on the performances crucial to this psychodrama, Mr. Prince seems fixated on the big production numbers and scenic effects, as if he felt obligated to warp his show to placate Broadway audiences' presumed insistence on spectacle even when he is ostensibly working away from the commercial dictates of Broadway. And the spectacle falls short. The jailhouse choruses, though as grimly conceived as ''Fidelio,'' still have an antiseptic musical-comedy sheen. Thomas Lynch's scenic design, an inversion of the Hollywood-versus-reality color scheme of Robin Wagner's sets for ''City of Angels,'' is more busy than ingenious.

It's all frustrating because somewhere in ''Kiss of the Spider Woman'' is the compelling story its creators want to tell, which is nothing less than an investigation of what it means to be a man, in the highest moral sense, whatever one's sexual orientation. That story begins with two men in a tiny room, and if the creators of ''Kiss of the Spider Woman'' are to retrieve the intimate heart of their show, they may have to rescue it from the voluminous web in which it has so wastefully become ensnared.

KISS OF THE SPIDER WOMAN

Book by Terrence McNally; music by John Kander; lyrics by Fred Ebb; directed by Harold Prince; choreography by Susan Stroman; based on the novel by Manuel Puig; scenic design, Thomas Lynch; costumes, Florence Klotz; lighting, Peter A. Kaczorowski; sound, Alan Stieb; hair and makeup, Robert DiNiro; musical director and conductor, Donald Chan; orchestrations, Michael Gibson; dance arangements, David Krane; production stage manager, Beverley Randolph; assistant to Mr. Prince, Ruth Mitchell; musical coordinator, John Monaco. Presented by New Musicals, in association with the Performing Arts Center of the State Univesity College at Purchase, N.Y.

Valentin...Kevin Gray

Warden...Harry Goz

Molina...John Rubinstein

Aurora...Lauren Mitchell

Senora Moina...Barbara Andres

Armando...Donn Simione

With: Jonathan Brody, Bill Christopher-Myers, Karen Giombetti, Ruth Gottschall, Harry Goz, Philip Hernandez, Dorie Herndon, David Koch, Rick Manning, Carl Maultsby, Lauren Mufson, Casey Nicholaw, Aurelio Padron, Forest Dino Ray, Lorraine Serabian, John Norman Thomas, Wendy Waring, Matt Zarley and Greg Zerkle.

photo: John Rubinstein, left, and Kevin Gray in ''Kiss of the Spider Woman,'' at the Performing Arts Center in Purchase, N.Y. (Martha Swope/''Kiss of the Spider Woman'')