WOUNDED KNEE, S.D.--The seizure of Wounded Knee 17 days ago by members of the American Indian Movement finally brought a smouldering powder keg close to its explosion point. Since AIM was founded in Minneapolis, Minn. in 1968, its increasingly activist message pointed inevitably to a militant act.

The FBI lit the fuse of number of times during the first ten days of the occupation, and AIM leaders prepped the embattled village for a pitched battle. Russel C. Means, the top AIM leader, seemed almost exultant at the prospect of a confrontation. But the bust never came.

The U.S. Marshalls and the National Council of Churches favored more peaceful means of solving the dispute. By the end of last week, the NCC had managed to re-open negotiations.

Despite the shooting of an FBI agent Sunday, Wounded Knee has remained quiet this week. A raging blizzard on Tuesday helped create the low-key atmosphere, halting not only any FBI plans to storm the embattled village, but the negotiations as well.

At this point, a forceable end to the siege of Wounded Knee is unlikely. Life in the village has settled down to an almost idyllic pace, and AIM has even started construction of a "dormitory" in the captured trading post.

AIM seems to be headed for a long stay, and the government has even sanctioned the extended visit. Dr. John D. Asher '61, a doctor from Palo Alto Hospital in San Francisco, yesterday announced the organization of three medical relief teams which would provide indefinite medical care for the Wounded Knee community.

Asher said that all parties in the dispute, including the government and tribal council president, Dick Wilson, agreed to the medical relief teams. AIM has called for Wilson's ouster as one of its demands, and Wilson has shown open hostility toward non-Oglala, specifically the press and John T. Adams, the representative for NCC.

In fact, Wilson is the only fuse still lit here. Yesterday he began to enforce a tribal council resolution ordering all "non-residents" off the reservation. The resolution, approved by the Interior Department in Washington, was directed specifically at Adams.

When Chief Negotiator Harlington Wood returns today from top-level meetings in Washington, he may bring back a plan providing for a neutral meeting place. One hang-up in negotiations so far has been the Interior Department's refusal to negotiate in the "armed situation" that exists at Wounded Knee.

But the dispute will go unsettled until AIM leaders put their demands down on paper and negotiators--including Interior Department officials--begin in earnest.