WASHINGTON — Atty. Gen. Edwin Meese III has decided not to ask President Reagan to nominate Meese's longtime friend, Herbert E. Ellingwood, to a key Justice Department post that oversees judicial appointments, apparently for fear that the nomination could heighten the controversy over the Reagan Administration's position on separation of church and state, The Times learned Tuesday.
Administration sources said that officials had convinced Meese that opponents of Ellingwood, an outspoken Christian fundamentalist who heads the U.S. Merit Systems Protection Board, probably would attempt to show that Ellingwood has tried to recruit individuals with like-minded religious views into government.
New Name Mentioned
One White House source said that a new name "has been mentioned" for assistant attorney general in charge of the office of legal policy, the post for which Ellingwood was to have been nominated. He refused to identify the individual, however.
This source also said that the decision to withdraw Ellingwood's name from consideration would not become official until the White House personnel board meets after Reagan returns next week from his Santa Barbara vacation.
Ellingwood did not return a reporter's call, and it could not be learned whether he had asked Meese to withdraw his name, which has been under consideration at the White House for several weeks, along with three other proposed nominees for the six vacancies in the Justice Department's top management slots.
A spokesman for the Merit Systems Board, which hears appeals by federal workers who have been disciplined or fired, said that Ellingwood would have no comment.
The Administration, in a series of actions, is trying to return the Supreme Court to what it regards as a more "neutral" position toward religion, rather than the "hostile" stance that it claims the judiciary has embraced in recent years.
Two Key Cases on Docket
At least two crucial church-state cases are on the high court's docket this fall, and, although Ellingwood would have played no role in these cases, Administration officials feared that his nomination would broaden the controversy.
Only eight weeks ago, the Administration was forced to abandon efforts to promote its controversial civil rights chief, William Bradford Reynolds, to the Justice Department's No. 3 post of associate attorney general. Reynolds was blocked when two Republicans on the Senate Judiciary Committee joined with the panel's Democrats in voting against recommending his confirmation.
Some veteran Justice Department officials have complained that decisions have been delayed and other problems have resulted because half of the department's top management posts are filled by individuals serving in a temporary capacity.
Ellingwood's ties to Meese date from 1948, when they were high school friends. Ellingwood came to Washington at the beginning of Reagan's first term as President. Before moving to his current job, he served in the White House with Meese as deputy counsel to Reagan.
Drive Launched Quickly
When word surfaced that Meese had recommended Ellingwood for assistant attorney general, an unusual campaign, before the nomination, against his confirmation was launched by People for the American Way, a liberal citizens organization.
"At a time when five of nine Supreme Court justices are over 76 and one-seventh of the entire federal judiciary is vacant, it is critically important who makes recommendations for federal judgeships," Anthony T. Podesta, chairman of the organization, said in announcing the anti-Ellingwood drive.
Opposition to Ellingwood centered on a published report that he was providing help to a Christian "talent bank" operated by the American Coalition for Traditional Values, a network of about 100,000 fundamentalist churches. A House Post Office and Civil Service subcommittee, headed by Rep. Patricia Schroeder (D-Colo.), investigated the allegation but took no official action.
However, Schroeder accused Ellingwood of showing "a total disrespect for the whole idea of the merit system. He seems to think Christians have a corner on decency. You really have the feeling he thinks he's answering to a higher law."
Had Role in Meese Probe
Ellingwood also figured in the lengthy investigation of Meese's financial dealings by an independent counsel last year. The counsel heard allegations that Ellingwood had helped land a job with his agency in San Francisco for Gretchen W. Thomas, who had served as an intern under Ellingwood at the White House.
Thomas' husband, Edwin, was named San Francisco regional administrator for the General Services Administration in 1982. His interest-free $15,000 loan to Meese's wife, Ursula, which Meese failed to include in his financial disclosure reports, was one of the issues investigated by the independent counsel, who found no wrongdoing by Meese.