If Disney ruled the world, the restoration of Times Square would be an animated production and the denizens of Manhattan would "whistle while they work." Bluebirds would rest on the shoulders of the inner-city homeless and, with a splash of glitter and the touch of Tinkerbell's wand, prostitutes would be transformed instantly into Annette Funicello lookalikes clad in saddle shoes and sporting Mickey Mouse ears. If it sounds like a fairy tale, never fear -- it's what Disney does best.

But, renovating New York's decrepit Times Square will take more than starry-eyed wishes -- makes no difference who you are.

Once upon a time, of course, before television, film and multimedia, Broadway's glamorous 42nd Street was "the crossroads of America" -- a place where dreams were born and where people flocked to the dazzling lights and live entertainment. But after decades of urban decay, Times Square and its surrounding theater district have become the Big Apple's seedy core. The Ziegfeld Follies of yesteryear have given way to "XXXX" peep shows, drug deals and trash-strewn streets in which theatergoers clutch their wallets and spouses as they make their way through streetwalkers, panhandlers and hustlers.

During the last 15 years the effort to restore the luster of America's center stage has been an arduous process pushed by two governors and three mayors. Disney's Broadway debut has served as a catalyst for the renewal efforts. On July 20, after two years of negotiations, the California-based company cemented its commitment to renovate the area's historic New Amsterdam Theatre by 1997 and open an adjacent Disney Store by the end of this year.

Then, posed as if to take on the world, images of Mickey Mouse standing with outstretched hands and a broad grin dominated the backdrop of last month's press conference at which it was announced that Disney had just paid $19 billion for Manhattan-based Capitol Cities/ABC. Even Wall Street insiders were taken completely by surprise.

The takeover of the ABC empire increases Disney's worldwide influence, but on Broadway the company can expand its drama division and bring its unique style of entertainment to America's most exclusive theater district. For Disney boss Michael Eisner, a native New Yorker who majored in theater at Denison University, the two business ventures assure a commanding presence in media-crazed Manhattan. "Having grown up in New York," Eisner says, "I am personally thrilled that we are a part of the redevelopment of 42nd Street. New York is the center of the theater world and the New Amsterdam Theatre is at the historical center of New York theater."

Built in 1903, the New Amsterdam still is regarded as the crown jewel of New York's rich theatrical history, although it has fallen into serious decay. When Robert McTyre, senior vice president of Disney's Theatrical Division, first entered the building, plaster was falling off the walls and little remained of its original grandeur. But the restoration of the 1,900-seat theater will give Disney exactly what it has sought since the theatrical rendition of Beauty and the Beast began thrilling Manhattan audiences 15 months ago -- a stage of its own on Broadway.

Now that the daunting task of personifying characters such as an animated candelabra and clock has proved successful on stage, Disney plans to release a new Broadway hit each year, drawing from its vast repertoire of animated and feature films. "Beauty and the Beast was the first plunge," McTyre tells Insight.

Several redevelopment agencies laud Disney as the linchpin in their own efforts to uplift and carry the heart of New York's entertainment district into the next millennium. "Governor Pataki knew that we were determined to move very quickly with Disney at the helm," says Charles Gargano, chairman of the 42nd Street Redevelopment Project. "Disney will provide a wonderful continuation of the tradition of entertainment for young and old that was started here almost 100 years ago."

In fact, Disney has used its powerful appeal to influence many aspects of the renewal process, from selecting the developer to handpicking tenants. A $303 million project for the hotel and entertainment complex where Disney will house its store was granted to "Dream Team Associates," an affiliate of Tishman Urban Development Corp. Tishman has a long-standing relationship with Disney as the developer of Epcot Center and its surrounding hotels. And it is hardly a coincidence that American Multi-Cinemas, the prime marketer of Disney films, will erect a 25-screen movie complex just down the street.

In addition, a commitment from Madame Tussaud's famous London waxworks and the restoration of the Victory Theater, which caters to young people, will create a climate conducive to Disney's marketing.

"This project will change the look and feel of 42nd Street forever," says John Livingston, president of Tishman Urban Development. "Jobs will be created, tourism will be enhanced and once again 42nd Street will move to the beat of the dancing feet."

Despite the high energy of the promoters, questions remain about the the project's profitability and Tishman has yet to raise the hundreds of millions necessary to begin. Faced with a similar scarcity of funds, Prudential Insurance Co. of America curtailed a plan to build four office towers in the area. Disgruntled developers complain that officials offered Disney too sweet a deal.

Unlike the other companies involved in the renewal, Disney was enticed by $25 million in government subsidies largely in the form of city-financed low-interest loans for the New Amsterdam Theatre restoration, though Disney will invest only $8 million of its own. In retrospect, public officials believe they were inclined to acquiesce to the company's demands because Disney would attract other businesses with its tradition of quality and mass-consumer appeal.

But how will Disney fare in hardedged New York? Certainly it has no experience with urban renewal. Its previous ventures were in pristine locales where it could maintain control of every element from the ground up: Disneyland was built in the orange groves of California, Disney World in the Florida swamplands and EuroDisney in an agricultural area outside of Paris.

In fact, Disney has failed recently in three proposed ventures. Late last year, vehement protest from area residents squelched plans for a patriotic theme park in Northern Virginia. A minitheme park planned for Long Beach, an industrial suburb of Los Angeles, succumbed to pressure from environmental activists. In Seattle, Disney planners were hired to propose renovation designs for an aging civic center and were blasted with public hostility.

Disney's arrival in New York was met with similar contention. In mid-June the city agreed to provide the use of Central Park for the premiere of Pocahontas; 60,000 tickets that otherwise were unavailable to the public were distributed via lottery. Former Mayor Edward I. Koch said he believes the screening was a misuse of public space, although Disney donated $1 million to the city for the park's use.

Certainly preservationists who reminisce about Hammerstein musicals and Ruby Keeler's car-top prance in 42nd Street are disappointed with the commercial giant's appearance on Broadway. But Disney executives interpret this resentment as narrow-minded. "Theater is a very broad-based art form," says McTyre. "With Beauty and the Beast, some people are enjoying Broadway for the first time." McTyre explains how this new audience will continue to return to Broadway to enjoy other productions. "Ironically, the same people who are crying and whining (about Disney Theater) are also the people complaining about the poor box-office sales for the entire industry."

Mickey's mere presence won't make the slime disappear magically on a street that has come to be known as the "Deuce," a slick nickname describing 42nd's shady characters and underhanded activities. The urban Mouseketeers will have to depend on legislation for support. Mayor Rudolph Giuliani and the Times Square Business Improvement District have submitted a proposal to eliminate the porn establishments from Eighth Avenue north of 41st Street and prohibit future concentration anywhere else in the district. The proposal also would outlaw adult establishments within 500 feet of the school and seven churches in the area, and within 500 feet of one another.

But this attempt to out-zone pornography has faced opposition from leaders of New York's other boroughs, who believe that the peep shows and their accompanying crime will relocate to their neighborhoods. "42nd Street, you're building a beautiful Disney World and we're getting the prostitutes and everybody else in Brooklyn," complains Brooklyn Borough President Howard Golden. "This isn't a city, it's Manhattan against the rest of the world."