n All is not what it may seem: drag queens camp it up before the start of the annual parade through Sydney. The event has grown from humble roots in to the world's biggest gay and lesbian festival and a major tourist attraction, with 2000 overseas visits, and 3000 inter-state visitors.

THE light was beginning to fade. The crowd, the largest ever at well over 500,000, was restless. Those anxious for the best view had chosen their spot around noon; now nearly eight hours later they wanted action. The word went out that the Sydney Gay and Lesbian Mardi Gras Parade would start early. Everyone was ready: floats, floatees, and foot-soldiers with their marching routines. There were more than 160 entries, taking an hour and a half to pass any one point. They'd been planning and painting, sewing and rehearsing for at least a month. For the last few hours they'd been preening themselves, posing for pictures and getting excited. ''Happy Mardi Gras!'' they yelled to the crowd, who returned the chant.

I'd wandered around the assembly area for nearly two hours, getting a close-up of the floats, and the last minute preparations. I was used to the narcissim, which is part of the subculture, but I was puzzled by the exhibitionism, by the strange sight of so many drag queens: of so many men eager to turn themselves into women. And I was mesmerized by the mood of sheer exhilaration. Even the float in memory of those who had died of Aids cast but a fleeting shadow.

Tired, I took a ''seat'' - feet in the gutter, bum on the kerb - at the start of the Parade, next to a lesbian nurse from Adelaide. She was on duty for the next couple of hours and then she was off to the party. The famous 10pm to 10am, party of the year.

The roar of a dozen motor bikes revving brought me to my feet. Dykes on Bikes, women in black leather looking like men, led the parade. The crowd roared; they went berserk with ticker tape; they heaved against the barriers. The Parade was under way. I smiled to myself: amused that I was sitting in the gutter on a Saturday night in March in Sydney. It was all Priscilla's fault.

I'd said no several times. The conversation had gone like this: ''Are you interested in the Sydney Gay and Lesbian Mardi Gras, Linda?''

''No.''

''But you are staying on the route of the parade. It will be hard to ignore.''

''Surely not.''

''But the parade and festival are now the biggest tourist attraction. If you're interested in Australia today and the changes that have occurred you really should . . .''

I paused. Why was I being so resistant to this suggestion from a wise and knowledgeable friend? The answer was that I was thinking in terms of dull protest marches and not in terms of tourist attractions, spectacle, and fun. And even when my mind turned to celebration, I felt uncertain. And then I remembered Priscilla, Queen of the Desert. For all my fascination for things Australian, I hadn't bothered with the film until long after its release. And when I did see it, I was intrigued.

It's the kind of film I expect to come out of America, not Australia. What an image! Drag queens travelling in a van across Australia, camping it up in the desert, sometimes welcome, sometimes not, and even entertaining a group of aborigines by mouthing, to music, snippets of pop songs. What was it saying about contemporary Sydney, today's Australia? Something had changed.

I picked up the phone to find out if I could get a press pass and discovered the organisers were expecting 350 journalists, including 40 radio and TV networks from 16 countries. Even so, they were welcoming to a latecomer and within the hour I had been picked up from my hotel and taken across town to see where the floats were being made.

The atmosphere in the workshop said it all: high heels, high hair, high camp, high spirits. A quip a minute. And then I spotted a small group of men and women quietly painting ''G-Force'' on a banner. Nowadays members of the armed forces are allowed to take part in the parade.

In 1992 the Labor Government had defied the wishes of defence chiefs and lifted the ban on gays. And now, the forces have a float at the biggest gay parade in the world.

For David Mitchell, a sergeant in the Air Force, and founder of G-Force, the event was ''a dream come true''. ''We want to raise the awareness of people that there are gay and lesbian people in the Australian Defence Force and that we are proud to serve our country and proud to celebrate our community.''

For one night of the year there is celebration of what has been achieved since the first march in 1978. At the time, male homosexuality was still illegal in New South Wales. Then, on a June night, 1000 people marched down Sydney's Oxford Street to mark International Gay Solidarity Day, a commemoration of the Stonewall Riots in New York, when campaigners barricaded police inside a bar as a protest against incessant raiding of gay and lesbian bars. The crowd was small, the police unco-operative.

The Sydney march ended with 53 arrests. Further protests against the arrests resulted in another 100 people being charged. Within six months all the charges had been dropped and the mood began to change. The popularity of the parade grew slowly in the early years, the all-night party was added; so too were various arts events. A setback occurred when the ''straight'' media discovered Aids.

There were calls for both the parade and the party to be banned. Both survived and the Stonewall commemoration began to snowball.

The Parade is now the culmination of a month-long festival which boasts a 90-page programme containing messages of support from the prime minister and the state premiere. The festival includes theatre, music, film visual arts, street performance, sports and community events. There are cruises around Sydney harbour, visits to the zoo, and fashion parades. There's a bridge tournament. The hot tickets were for the massed gay and lesbian choirs, the cabarets and shows by American singers, Sandra Bernhard and Judy Connelli.

The Parade and Festival's sponsors now include blue chip companies like Qantas and Smirnoff. The ABC used to offer the odd news snippet, then progressed to edited highlights and now broadcasts the parade live. (This year the parade coincided with election day. The full screening was delayed but still managed to attract a record audience).

The parade and festival is now the largest annual gay and lesbian festival in the world. The occasion certainly puts pressure on accommodation, attracting 2000 overseas visits, and 3000 inter-state visitors. 20,000 tickets are sold to the all-night party at #30 a throw.

n For further information: a fact sheet on the festival and parade is available by calling the Australian Tourist Office's Helpline on 0990 02200 or by using the ''Faxback'' service: dial 1891 404 404 on a fax machine, wait for the initial greeting and then key in the PIN 507, and the fact sheet will be sent immediately. The Festival runs through February with the annual parade and party taking place at the beginning of March. Contact: The Sydney Gay and Lesbian Mardi Gras: PO Box 557, Newtown, New South Wales 2042. Tel: 00 61 2 557 4332 or Fax: 00 61 2 516 4446.

It is advisable to book hotel accommodation as early as possible. The Australian Gay and Lesbian Tourism Association: PO Box 208, Darlinghurst, New South Wales 2010. Tel: 00 61 2 9955 6755 or Fax: 00 61 2 9922 6036.