At the beginning of Big Foot Trail, some 45 miles west of Wounded Knee, S.D., a yellow, slightly faded billboard stands frozen against the bleak Dakota horizon. "45 miles to Wounded Knee," the billboard screams. "The historic site and mass grave of the last battle between the Indian and the white man."

Members of the militant American Indian movement passed that sign on their way to seize Wounded Knee. It is unlikely that they took any particular notice of the yellowed billboard. But to the white man, the sign works like a neon light, blinking subconsciously, "45 miles ahead-rid yourself of your guilt feelings here."

The white man's catharsis has been a long time in the making. Since the first meeting of the two cultures, the white man has sought to dominate the red man, and for the last 100 years, he has dominated the Indian completely.

For the Indians, the last hurrah came on this desolate reservation at a creek known as Wounded Knee. The Pine Ridge reservation was only a year old when the U.S. seventh cavalry, Custer's former outfit, slaughtered 200 Indian men, women, and children, in what came to be known as the last battle of the Indian wars.

The cavalry had killed Indians before, but somehow this massacre sapped the Indians of their spirit. Most of the great leaders were gone-Sitting Bull and Crazy Horse had been murdered (see pages 6 and 7), Red Cloud and Big Foot died in the massacre, Geronimo was a prisoner of war.

Gradually, the government herded all the Indians onto reservations, and the slow process of Americanization commenced. In 1924, the Indians obtained citizenship and suffrage rights, and in 1934, the Indian Reorganization Act provided the red man with the mechanism for setting up miniature American democracies. By 1950, the United States had turned the Indian into an American, but still treated Indian people like second-class citizens.

In the fifties, the government began what is now called the policy of "termination." Literally, Congress voted to cut off Federal funds-to terminate financial assistance-to various Indian tribes. But this trend had more insidious-and hidden-implications.

Although many Federal officials argued that the withdrawal of funds would increase Indian self-government, they ignored the following considerations:

* full assimilation of the Indian into American society would eliminate all Indian culture, or at least make it difficult to maintain;

* withdrawal of funds earmarked for impoverished individuals would further contribute to the breakup of Indian culture; and,

* reservation governments could not run without money, again forcing Indians from Indian life into American life.

In recent years, the Nixon administration has reversed the termination policy, increasing funds to Indian affairs by $300 million. Last year, the Bureau of Indian Affairs (BIA) received $530 million, the largest amount ever.

But renewed financial support coincided with the formation of the American Indian Movement (AIM), and a resurgance of interest in resurrecting Indian life and culture (see page 8). This apparent contradiction is only one of many in the Wounded Knee incident. Many observers claim that AIM's demand that the United States replace Oglala Tribal Council President Richard Wilson means that the government would once again interfere with Indian self-government.

This is a lame excuse at best. The tribal councils cannot function-either financially or legally- without the approval of the Bureau of Indian Affairs, and that organization must answer to the Interior Department.

AIM's demands at Wounded Knee centered around these three agencies. The militants called for the ouster of Wilson, Pine Ridge BIA superintendent Stanley Lyman, and Aberdeen, S.D., area Interior supervisor Wyman Babby.