Her Truth Is Scheherazade’s : ALIAS GRACE By Margaret Atwood; <i> Nan A. Talese / Doubleday: 468 pp., $24.95</i>

Margaret Atwood has used a sensational double murder that took place in Canada 150 years ago to perform a series of improbable feats. “Alias Grace” tells a grim story--two servants who were convicted of killing their master and his housekeeper-mistress--in a way that becomes pure enchantment.

It evokes the society of the time in ironic and richly diverting detail. It portrays an astonishing heroine--Grace, the woman servant--so as to make her utterly present and unfathomable. Atwood, one of the notable novelists of our time, knows that in fiction as in life, a character is not an answer and that the people who are the most real to us are ultimately the most mysterious. The more that Grace perplexes us, the better we know her.

Running through Atwood’s intoxicating play of alternate versions, of revelations that conceal and fabrications that reveal, is a philosophical question that has been gnawed over through two generations of critical literary discourse. In “Alias Grace,” which may be Atwood’s finest and most complex book, a battered theory becomes a bewitching human presence.

The story of Grace and her “crime,” debated in a slew of contradictory versions at her trial, in newspaper accounts and in public polemics, is also the story of narrative itself.

The Bible may be the voice of God but, being written down by men, it is full of mistakes. This according to Simon Jordan, a sympathetic doctor who arrives to question Grace at the book’s beginning. He is bent on determining not so much what she has done as who she is. A narrative, Atwood suggests, inspired by a true event, is altered in the mouth of every narrator and the ear of every hearer. Further, it alters mouth and ear. Neither Jordan nor Grace will emerge unchanged.

More particularly, the narratives in which Grace finds herself are masculine and have determined her fate. This is true whether they belong to her accusers--the fellow-servant who insisted that she instigated the crime, the jury that convicted her, the journalists who wrote about her, conservatives to whom she represents the dangerous immigrant classes--or to her defenders, liberal politicians and clergymen, reforming penologists and Victorian pioneers of medical and psychological research. Grace’s own voice, spinning its glistening web of truths, lies, visions and evasions, is a female voice gone underground.

Sixteen years after the murders and her fellow-servant’s execution, Grace is serving a life sentence as a semi-privileged prisoner. She works as a maid for the prison governor and his family, who prize her for her dignity, her exquisite needlework and her standing as a cause ce e lebre of Canadian intellectuals.

A committee of these, headed by a clergyman, the Rev. Verringer, and Mrs. Quennell, a spiritualist of considerable social and physical prominence--”In her crinoline-supported skirt brackets,” Atwood writes, she “resembles a lavender-colored Bavarian cream; her hair appears to be topped with a small gray poodle”--has brought in Jordan, fresh from his psychiatric studies in Switzerland. They commission him to dig into the young woman’s psyche and write a report to back a petition for clemency.

Much of “Alias Grace” consists of Grace telling her life story to Jordan. It is a brilliant pastiche, a shrewd, Defoe-like account of an impoverished immigrant girl trying to make her way as a servant in a series of Canadian households. Grace speaks with a realism that is grim and poetic by turns.

Her family’s passage from Ireland to America, jammed into the foul hatches of an immigrant ship, is vivid, laconically phrased documentary; the description of her mother’s corpse--she dies aboard--wrapped in white and slipping slowly down into an iceberg-studded sea, is a wisp of the haunting pattern that will reappear throughout. Grace’s practical resourcefulness in tragedy is a sign of an unstoppable persistence. She divides her sole treasure, a lemon, among her bereft younger brothers and sisters.

“It was so sour that you felt it must be doing you good; it was the only thing I could think of.”

Life as a maid is laborious, ill-paying and humiliating, yet it has its comfort, even its joy. Grace was warm and well-fed, for example. There were times of celebration: an abundant Christmas in Toronto and a summer evening’s ease on the veranda of the country house where Grace came to work for the ill-fated Thomas Kinnear and Nancy Johnson. There is the pleasure as well as the arduousness of domestic work; a lyrical passage about laundry, for instance.

There is a passionate friendship with an older maid who teaches her the job, and also something about gaiety and how to be a woman. A terrible social and sexual tyranny underlies it all, though. Her friend, pregnant by her employers’ son, dies after an abortion; Nancy conceals her own pregnancy for fear that Kinnear will turn her away and perhaps take Grace in her place. Kinnear’s handyman, James McDermott, is alternately seductive and murderous.

As she gets close to the consequences of “seductive and murderous,” Grace’s story begins to fibrillate and splinter. She falters, recounts nightmares and visions, claims forgetfulness. McDermott’s evidence at the trial was that she had incited the killings by offering him sex and had helped to strangle Nancy. Grace’s story was of passively participating, under McDermott’s threat to kill her, and of refusing his advances.

One of her stories, that is. Over the 16 years since the murders, she has testified, given interviews and read all the different things written about her. As she tries to think what she will tell Jordan, it all blurs.

“I can remember what I said when arrested, and what Mr. MacKenzie the lawyer said I should say, and what I did not say even to him; and what I said at the trial, and what I said afterward, which was different as well. And what McDermott said I said, and what the others said I must have said, for there are always those that will supply you with speeches of their own and put them right into your mouth for you too. . . . I was there in the box of the dock but I might as well have been made of cloth, and stuffed, with a china head; and I was shut up inside that doll of myself, and my true voice could not get out.”

Grace’s polyphony of voices is a brilliant achievement. We are as anxious as Jordan to know what she is, yet bit by bit it seems to matter less. What matters is that she becomes more and more distinct and unforgettable. The formal, almost prudish narration alternating with erotic hallucinations and moments of panicky calculation, the wit, the grace, the allure--these provide something much fuller than an explanation.

Her truth is Scheherazade’s. Captive not to a sultan but to a sultan-like society, she tells tales to survive (in this case, in hopes of clemency). Yet she also gets caught up in the telling. She wants to please Jordan--among the fine complexities of Atwood’s design is a burning and utterly suppressed mutual attraction--and she would like to tell the “truth” he seems to want if she can identify it and manage it safely.

The story is also the story of the storytelling. As Scheherazade talks, the sultan disintegrates. Jordan’s slow collapse is a splendidly comic, touching and instructive achievement. His masculine notion of narrative is finding the truth through step-by-step arguments and evidences. Grace is testimony to a cosmos where steps crumble and evidence is contaminated. Her narrative and the book’s governing and recurring image are the quilt: No depiction supersedes any other, but all are stitched side by side.

In her deepest, least-guarded moments, it is quilting that Grace thinks of. It is her art and, survival aside, her only passion. “Alias Grace” is patch set by lovely patch.