RESTAURANT REVIEW : Palazzio Still Primo in the Food Chain : The popular Montecito eatery keeps drawing crowds with its first-rate menu, large portions and moderate prices.

We need to believe. Believe, that is, that they are doing something right up the coast.

A couple of years ago, when we first ate at Palazzio, on the main drag in Montecito, the place had lines of people waiting to get in nearly every night.

These enthusiasts were standing around outside the doorway holding small glasses of red wine and rubbing their stomachs in anticipation.

The wine, it turns out, helps ease the pain of waiting for a table, sometimes as much as an hour or more.

To have that many people waiting that much time, you just have to be doing something right.

At Palazzio, they apparently are, nearly two years after opening. Customers are still lining up for a lot of fun, giant portions of fairly good food at competitive prices. The menu has changed a bit, but if you are an economist, you may wonder as you leave--carrying leftover goodies in a bag--how they can provide so much food for such a price.

Ken Boxer, who originally started the place with partner Stephen Sponder, of Palace Cafe fame, has taken over the operation and maintains Palazzio as one of the area’s most popular eateries.

The room is open and noisy, with wooden floors and sporting large Italian platters on the walls. At the edge of the room are “honor” vats of red wine--Italian Merlot--from which you help yourself, at $2.95 per glass, which accounts for the wine consumption going on outside. Patrons provide the waiter with a tally at the end of the meal.

Boxer runs the restaurant on a “team service” system, meaning any staff member on the floor can get what you want.

The staff hustles about the room, passing out hot garlic rolls, which are on the house, at the start of the meal. You may add an excellent chopped black olive spread ($1.25).

You can believe the menu when it tells you that half orders are usually plenty for one person. If there are two in your party, for instance, and order an appetizer each and an entree each, you will most likely end up with an entire meal to take home.

If you are an Italian--or want to eat like one--you might start by ordering a platter of antipasti Palazzio ($7.95 half, $9.95, full). It is a meal in itself, even in the half size, grouping cold grilled eggplant, Kalamata olives, prosciutto, marinated mushrooms, roasted red and green bell peppers.

Or perhaps the Caesar salad (half $4.95, full $6.95), to which you can add shrimp or grilled chicken. The original, complete with parmigiana and reggiano cheeses, is crisp, has a slight anchovy tang and, it seems to me, is much improved over the salad served when the restaurant first opened.

In fact, it seems that a number of dishes have improved as the restaurant has matured.

Also on the appetizer list is calamari fritti ($5.50 half order, $6.95 full), tender and deep-fried, not too oily, better with fresh lemon than the accompanying marinara sauce, which was rather dull. Pastas--need you ask?--are the heart of the Palazzio menu. But they are a mixed bag.

The fusilli ($7.95 half, $9.95 full) with roasted eggplant, roasted red peppers, pine nuts and Gorgonzola is gorgeous. It is rich and truly succulent. But the penne puttenesca ($8.25 half, $10.25 full), a dish with enormous potential, is dull.

An occasional special, penne Amatriciana ($9.75 half order, $12.75 full), has a lovely smoky taste of pancetta, a picante flavor from the tomato sauce, Parmesan and Romano cheeses. There is also a hint of heat from chili peppers.

One of the best dishes on the menu is an oven-roasted rosemary chicken ($8.95 half, $10.95 full chicken). This is no small bird, but a full-grown large bird, beautifully crisp and crusty with oil and rosemary on the outside, and usually juicy and tender inside.

House desserts have also improved at Palazzio. They’ve got the tried and true tiramisu ($4.75), which is adequate, and an outstanding homemade gelato of dark chocolate ($3.95). And they are trying what may be the trendy Italian dessert, panna cotta ($5.25). Palazzio’s version of this custard-like dessert is almost rubbery in the mouth from the gelatin, terribly sweet, with a light rum glaze and a hint of vanilla bean, set in strawberry puree.

Do watch out for a dessert they occasionally have as a special--bananas Foster ($6). I doubt this has any sort of Italian origins, but the fresh bananas, flambeed with rum, brown sugar and served with vanilla bean gelato, are gangbusters. If you are not a dessert eater, try this one anyway.

Details

* WHAT: Palazzio.

* WHERE: 1151 Coast Village Road, Montecito.

* WHEN: Open for lunch, 11:30 a.m. to 2:30 p.m. Monday through Saturday; dinner, 5:30 to 11 p.m. Sunday through Thursday.

* HOW MUCH: Lunch or dinner for two, food only, $14 to $42.

* CALL: 969-8565.