Better Than Awful, Less Than Grand Pennsylvania Station, New York City's underground monument to bad design and low ambitions, may be getting some work done. Newsday reported last week that a Los Angeles firm was drawing up plans to improve the station's cramped, blighted corridors. Once the report is delivered, and if the money is found - a big if - the station's dungeon masters, Amtrak, New Jersey Transit and the Long Island Rail Road, would work together for the first time to make Manhattan's most dismal gateway a little less so. Even the best hopes for the project are, like the station itself, severely limited. There will be no knocking it down or moving Madison Square Garden, which lies atop Penn Station like a manhole cover. There is no chance of making it into a great space like its crosstown rival, Grand Central Terminal, or the giant post office across the street, where a separate project, Moynihan Station, is moving very slowly forward. The only objective here is to move people through Penn less miserably, with better lighting and clearer signs, and maybe a better class of tenants to supplement the beer-and-popcorn stands. The station surely needs it. Commuters grow inured to its awfulness, but any traveler just in from Washington or Philadelphia would surely be baffled by the station's disconnected parts, each with its own form of decay. Passengers throng under departure and arrival boards, then cascade like salmon down to the tracks. Soldiers in fatigues with automatic weapons and cops with dogs add to the sense of siege. Penn Station does have a few small, hidden pleasures. It has a kinetic sculpture by Maya Lin, a good Guinness-and-oysters pub, and a little place near Amtrak that sells sushi and green-tea soup. That plus a couple of guitarists who play the blues on the L.I.R.R. level are almost enough to make you forget to get the heck out of there.