February 23, 1988

LEAD: SCIENTISTS are finding that human skin, far from being just an elegant waterproof wrapper, is a surprisingly complex organ that produces or remodels hormones, enzymes and other substances that may have vital effects throughout the body.

LEAD: The Soviet Union and the United States announced today that progress had been made in two days of negotiations on a treaty reducing long-range nuclear weapons.

LEAD: THE ECONOMY The I.R.S. is giving incorrect information to people who call for help with their returns at least 25 percent of the time, the agency concedes. The G.A.O. says the bad information is offered in response to 39 percent of the questions. The telephone assistance program is more important than ever because most provisions of the monumental Tax Reform Act of 1986 take effect this year.

LEAD: In its third venture into investment banking in the last 15 months, the Franklin Savings Corporation, of Ottawa, Kan., agreed yesterday to buy L. F. Rothschild Holdings Inc., the financially troubled 89-year-old investment house.

LEAD: The illicit drug scene in the nation's capital has become one of the most violent in the country, according to law-enforcement officials.

LEAD: Hostage Videotape Issued The kidnappers of a marine in Lebanon released a videotape in which he appealed to Washington to meet his abductors' demands. Page A3. Setback for Evangelicals The High Court won't hear an appeal from parents who say their children should not have to read schoolbooks offensive to their beliefs.

LEAD: A memo written to Attorney General Edwin Meese 3d in 1985 said ''a portion'' of the proceeds from a projected Arab oil pipeline would ''go directly'' to the Israeli Labor Party. A copy of the document was made public today by Mr. Meese's lawyers.

LEAD: THE race for dominance in making semiconductors, the tiny chips that carry electronic circuits, is entering a new phase as scientists convinced they have almost exhausted the present technology strive to use X-rays to make chips that are faster and more powerful.

LEAD: As part of a continuing series of sanctions following the stock market collapse in October, the New York Stock Exchange said yesterday that two specialist firms - La Branche & Company and Lawrence, O'Donnell & Company - had been asked to stop making markets in several stocks.

LEAD: Navy Secretary James H. Webb Jr. resigned today, sharply criticizing Defense Secretary Frank C. Carlucci's plan to cut the Navy's fleet and his approach to managing the Pentagon.

LEAD: After major campaign tests in Iowa and New Hampshire, a majority of the public is now paying attention to the Presidential race and throwing more support to three of the early winners, Michael S. Dukakis, Richard A. Gephardt and Bob Dole, the latest New York Times/CBS News Poll shows.

LEAD: The legal stalemate over the case of Tawana Brawley, a black Dutchess County teen-ager who says she was abducted and sexually assaulted by six white men, has raised troubling questions about the conduct - and ultimate objectives - of the girl's lawyers, Alton H. Maddox Jr. and C. Vernon Mason.