It's black, lesbian, quirky, steamy - and taxpayer-funded.

"The Watermelon Woman," directed by Cheryl Dunye, seeks to promote a part of black sexual history she says the history books have left out.

Miss Dunye, 30, a Philadelphia native with a dry wit, androgynous clothing and a shaved head, has been compared to filmmakers Spike Lee and Woody Allen.

But her low-budget film on a mythical 1930s black actress who falls in love with a white woman differs somewhat from "Do the Right Thing" or "Annie Hall."

The film features what one review described as "the hottest dyke sex scene ever recorded on celluloid" - and was funded by a $31,500 grant from the National Endowment for the Arts.

Critics say the NEA is using black artists to push a homosexual agenda, but Miss Dunye says the work is merely a comedy meant to show homosexuals' human side.

The debut of "Watermelon Woman" this Sunday at the New York Lesbian and Gay Video and Film Festival raises the question of whether the NEA should be marketing a sexually explicit film as black history. The agency's news release says the film merely "re-creates historical black cinematic images and attempts to point out the lack of information about black women in history."

"There is no demand in the black community for this movie," said Edmund Peterson, chairman of Project 21, a Washington-based organization of conservative blacks. "This is a classic example of the Clinton administration being in bed with the gay-lesbian movement and funding a project through tax dollars that can't get funded any other way.

"Everything gets put under the cover of black history. If we have a film on black criminals, is that black history? If there was a movie on black Christians, it wouldn't get funded. The NEA wouldn't fund a movie about black businesses in America. I'm not arguing her right...