President Reagan has given his approval to a site for a presidential library in the foothills overlooking the Stanford University campus. In a letter to university President Donald Kennedy, Reagan said he was "very pleased" with the Stanford board of trustees' unanimous decision to locate the library on a 200-acre site near the university. Although supporters said the proximity would provide easy access to presidential documents for students and professors, critics charged that it could create traffic problems. Reagan's approval of the site clears the way for selection of an architect and setting up of a private foundation to finance the project. Although no official estimates have been made, a Stanford spokesman speculated that the cost could run as high as $20 million.