SANTA ANA — For decades, Southern California has relied on cheap immigrant labor to build homes, tend gardens and fry fast food. Many of the men and women doing this low-wage work have come here illegally.

Illegal-immigrant labor is like the proverbial elephant in the living room--everybody knows it is there but most pretend not to see it. But last week, the elephant raised up and roared through the Orange County building industry when 153 striking drywall workers were arrested on trespassing charges.

Sheriff's deputies jailed the drywall workers, alleging they had rushed a Mission Viejo construction site as part of a larger labor protest focusing on low wages and long hours. Things got more complicated, however, when federal investigators accused 86 of the workers of being illegal immigrants.

Suddenly, a routine labor dispute--already stoked by a relentless recession--became inflamed by issues of immigration.

And now, the heat has begun to spread:

* Federal officials find themselves forced to either deport some of the drywall hangers--cruel punishment in the eyes of civil-rights leaders--or knowingly allow illegal immigrants to go free.

* The drywall subcontracting firms that employed the workers are worried that they could be penalized under the Immigration Reform Act of 1986 if it can be proven that they knowingly hired illegal immigrants.

* Union leaders who normally embrace such a strike must decide if they want to represent some of the same workers who helped break the back of the drywall unions 10 years ago by agreeing to work faster and cheaper.

"California and our nation in general suffers from a terrible case of schizophrenia when it comes to immigrants," said Msgr. Jaime Soto, a Catholic prelate counseling the drywall workers. "They need them but there is an anxious ambivalence about their presence here."

The Building Industry Assn. says that the policy and practice of its members is to obey all labor laws, including those governing the minimum wage and the hiring of foreign workers.

Paid by the square foot, laborers say their average weekly income is about $300.

Drywall work involves lifting slabs of plaster and paper weighing more than 100 pounds and nailing them to interior wood frames. Workers then tape the seams and paint over the walls.

About 1,000 drywall hangers throughout Southern California walked off the job more than a month ago, demanding higher salaries, better working conditions and the right to be represented by a union.