CITY OF THE LIVING DEAD E.L. Doctorow's The Waterworks mixes a bizarre horror story with the sights and sounds of 19th-century Manhattan BY PAUL GRAY A beautiful widow left destitute by the will of her plutocrat husband. The surreptitious exhumation of a corpse while fog swirls in the phosphorescent light of early dawn. A treasure chest crammed with cash. Innocent children falling victim to a mad scientist in pursuit of the secret of eternal life. A brilliant, tormented young hero who says things like, "Either I am mad and should be committed, or the generations of Pembertons are doomed." Now for something truly weird. These gothic, melodramatic flourishes appear not in the first chapter of the latest Stephen King novel but rather in E.L. Doctorow's The Waterworks (Random House; 253 pages; $23). This is not entirely unexpected. The author of such luminous page turners as Ragtime, World's Fair and Billy Bathgate has made it a habit to surprise his readers with each new book. His central concerns - the unavoidable sway of historical forces, the insidious effects of the powerful upon the powerless - have remained constant, but he has chosen a variety of fictional voices and techniques to bring them to life. Even longtime readers, though, are likely to find The Waterworks Doctorow's strangest and most problematic invention so far. The setting is New York City in 1871, although the story of what happened there and then is told at an indeterminate later date by a man named McIlvaine, who notes, at one point in his narrative, "I have to warn you, in all fairness, I'm reporting what are now the visions of an old man." A number of similar caveats are interspersed throughout the story, and taken together they add another level of mystery to the point he makes over and over again: he has been a witness to horror and lived to tell the tale. Which, perhaps, begins as follows. As the city editor of the New York Telegram in April 1871, McIlvaine emp...