A countertradition is coming into being,"" suggests editor Abrahams, pointing at the neo-formal, surreal tall tales told here by Woody Allen, Robert Henson, Max Apple, and Mark Helprin. Perhaps. But this is a particularly safe and traditional O. Henry collection--nothing nearly as avant garde as, say, William S. Wilson (a '77 entry), nothing very violent or disturbing: a mild and solid group of 18. The First Prize winner is quite rightly Allen's ""Kugelmass Episode,"" in which a City College professor becomes a new character in Madame Bovary, taking Emma B. for trysts at the Plaza: an inspired literary joke that also captures the hollow essence of all fantasy lives. Only slightly less heady are Apple's poignant-daffy meditation on the youth of Jerry Ford (which appears in his Oranging of America collection) and Helprin's resuscitation of the Magic Mountain-climbing motif, while Henson's fictionalized Battle of Jericho is rather leaden. Otherwise, the mood is mostly somber, featuring middle-aged alcoholism (Blair Fuller's openly autobiographical ""All Right"" shows up the glossy soap operatics of Alice Adams' ""Beautiful Girl""); youthful uncertainties circa 1955 (John J. Clayton) and after (Edith Pearlman); and aged fortitude (Josephine Jacobsen's 93-year-old Mrs. Travis cuts down and gathers all her garden blooms to save them from ""Jack Frost""). And Tim O'Brien presents Paul Berlin, the Vietnam protagonist of Going After Cacciato, in a post-war vet vignette. Other contributions: Susan Engberg's ""Pastorale"" of May-August romance, Joyce Carol Oates' case study of infatuation with ""The Tattoo,"" Jessie Schell's too-familiar family history, Curt Leviant's publish-or-perish fable, the late Mark Schorer's ""A Lamp"" (seen also in Pieces of Life), an unsatisfying fragment on remembered ""happiness"" from Harold Brodkey, James Schevill's riveting, anti-journalist ""Hero in the Highway,"" and--the only story here that you'll need to read twice--Susan Fromberg Schaeffer's ""The Exact Nature of Plot,"" which turns a slice of writer's life into a nightmare involving a crepe-paper 'dog that goes for the throat.