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A Navy panel's recommendation yesterday against discharging an admitted lesbian was a crucial test of the Clinton Administration's"don't ask, don't tell" policy, according toTIME Defense correspondent Mark Thompson. A Navy board in California said Lt. Cmdr. (Select) Zoe Dunning should remain in the service despite the fact that she declared her sexual preference last year. Dunning convinced the board that she fulfilled the sole condition under the policy that allowed her to stay in the Navy: that she didn't engage in lesbian sex. "How she would have proved that is an interesting question," says Thompson. "But it shows that the policy isn't black and white -- there is some gray." The Navy did not comment on the ruling. It was heralded as a victory by gay rights activists but dismissed as an anomaly by the American Civil Liberties Union. The recommendation first goes through the Navy's chain of command but ultimately will be evaluated by the Secretary of the Navy. Says Thompson: "It shows that the policy is still confused. It will take at least a couple of years to crystallize."Post your opinion on theThe Sexesbulletin board.