THE LOEB'S production of Lulu is the perfect portrayal of a nightmare. The stage is draped in red. Characters float in and out and die while piano rags tinkle soothingly in the background. As in all nightmares, there is no interior logic, just a disembodied series of sketches that provoke mingled horror and impatience at their very disjointedness. For all the melodrama, stabbings, shootings, spurting of blood and impassioned speeches, the play leaves one fundamentally cold. And Frank Wedekind probably wanted it that way.

Director Peter Sellars chose to combine two Wedekind plays--Earth Spirit and Pandora's Box--that were treated in Berg's opera Lulu. Wedekind, writing in the late 19th century, deliberately set out to shock and horrify the conventional polite society of his time. Some of the melodramatic trappings of his play stem from his desire to force members of what he saw as a stuffy and hypocritical society to recognize the sex, passion and greed that lay at the foundation of their relationships. In Lulu, Wedekind describes the rise and fall of a peculiarly passionless beauty who works herself into society (and out) with the help of a perverse benefactor. Along the way, all the men she takes as lovers meet tragic and bloody ends.

Although he writes in a style of studied unconventionality and portrays his depraved characters sympathically, Wedekind nevertheless wrote a morality play. The characters are not human beings but types and all receive their just deserts by the final curtain. However, no sense of optimism or serene belief in retribution lighten the atmosphere of depravity and despair. The world remains cold, detached, evil--and absurd.

Wedekind was undeniably an influence on Brecht, who has the same disdain for interior logic, presents characters as symbols, and portrays a similarly seamy and exploitative world. But Wedekind's people lack the earthiness of Brecht's; their passions seem forced and silly. Brecht managed to create recognizable, if exaggerated, people. But Wedekind's characters are pale and disembodied ghosts. This failure flaws the play and riddles it with inconsistencies that make the characters hard to portray, the play hard to follow, and leaves it ultimately insubstantial. Wedekind brilliantly creates an atmosphere; he simply cannot create people to inhabit it.

NEVERTHELESS, Sellars and his technical crew have done a magnificent job of capturing this atmosphere. In Lulu, Sellars has found an appropriate vehicle for his operatic style of staging. Here he can indulge his predilection for larger-than-life dramatics.

The set, despite its simplicity, is suitably rich and ornate. Liz Perlman's costumes are strikingly beautiful, especially her debauched creations for Lulu. The haunting photograph of Anne Clark as Lulu, as well as the jarringly lighthearted piano rags played by Roy Kogan, also contribute to the play's eerie decadence.

Sellars' direction skillfully capitalizes on this mood. The half-lit scene changes are a brilliant inspiration, reinforcing the nightmarish quality of the play and helping to tie the acts together.

One of the few serious errors in the staging, however, is Sellars' insistence on breaking up scenes with annoyingly frequent black-outs. The extensive cuts Sellars had to make in the script did not improve its already formidable inconsistency, and the blackouts exacerbrate this choppiness. Some of them, especially in the first act, are completely unnecessary.

But the inconsistency that plagues Lulu shows most clearly in the title character herself. One moment Lulu is the innocent, pursued child; the next she ruthlessly manipulates Dr. Schon into marrying her. She is the victim but also the executioner, and her heartlessness is equalled only by her astonishment at the havoc she wreaks. To her credit, Anne Clarke manages to wrest a characterization out of this maze of contradiction, and falters only when the script itself cannot sustain her. She is able to present Lulu sympathetically, with the right mixture of helplessness and hardness.

Unfortunately, the play does not allow her to establish any defined relationship with Dr. Schon, her benefactor (David Reiffel). The scenes involving the two of them, with the exception of Lulu's declaration of love, lack any sense of tension or attraction. Here Reiffel might improve his otherwise effectively sardonic characterization by displaying more passion. He is so ironic and biting that his later capitulation does not ring true.

The performances of Lulu's successive lovers vary according to how skillfully Wedekind wrote the parts. Christian Clemenson is delightfully boorish as the crude Dr. Goll. His braying inanities lighten the otherwise disjointed first act. Brian McCue's portrayal of Scwarz, however, is uneven, improving considerably from the first act to the second. When he first meets Lulu in the opening of the play, McCue relies too much on a series of mannerisms--rising on his toes, rubbing his hands, pacing around briskly--that distract attention from his passionate words. Japes Emerson turns in a sporadic performance, though he is cursed with the worst, most heavily edited part of the play. The cuts render his part almost unbelievable, and thus his characterization moves from dilletante to lover to weakling.

Andrew Borowitz seems admirably suited for the part of Rodrigo, the circus acrobat turned informer, although at times his lines are inaudible; Maura Moynihan is uncannily boyish as his male sidekick. One of the best cameos is Paul Redford's chilling portrayal of Jack. He is authentically sinister in a horrifying last scene.

GRACE SHOHET portrays the play's most interesting and controversial character, the lesbian Countess Geschwitz, who sacrifices everything for Lulu. Wedekind created the only fully rounded human portrait in the role of Countees Geschwitz, and Shohet infuses it with pathos. Her despairing speech in the last act strikes one of the few sincere notes in an otherwise emotionally detached production.

Despite the high quality of the acting and the consistently clever staging, the play itself somehow remains insubstantial. By failing to people his sinister world with real human beings, Wedekind never touches emotion. It's like waking up from a nightmare, only to find nothing there to worry about.