By Vanessa V. Friedman
Updated August 21, 1998 at 04:00 AM EDT

For years a small group of Orthodox Jews have been spending their winters in Washington Heights and their summers in the upstate New York town of the title. Separated by dress, diet, and religious practice, they’re effectively insulated until the Bicentennial summer of 1976, when some of them raise their own flags of independence. There is teenage Renée, who befriends a rebellious Syrian neighbor; her friend Chani, who sneaks books about Israel from the library; Chani’s mother, Elizabeth, who opens her own grocery store; and the ancient rabbi, leader of the flock, who startles them all by reaching out to his atheist son. Unsensational though its action is, Kaaterskill Falls is a sneaky celebration of the American dream. A-