The moment you walk into SF Playhouse, just off Union Square, the homey, lived-in feeling gives you the strange sense that whatever you were looking for, you’ve come to the right place. Head up the creaky staircase and into the intimate lobby, where the “box office” is an eager young volunteer cutting tickets behind an old, rec room–style bar. Suddenly, you hear the buzz of a heated crowd in the next room. It sounds like a gathering of friends, an impromptu cocktail party. You move past the tiny concession stand, into the packed house, and to your seat. The audience, still bubbling with talk, takes more than a minute to settle down when the house finally goes dark.

When the lights come up again, they reveal the kind of polished, professional set you might find at a Bay Area theatrical institution like A.C.T., whose commercial and artistic cred goes all the way back to the 1960s. SF Playhouse is a baby by comparison—not yet five years old—but the design, by artistic director Bill English, brings the world of the play to life with impressive precision.

We’re here to see The Scene, Pulitzer Prize finalist Theresa Rebeck’s acidic comedy of romantic disaster. The knockout cast features busy local actors Aaron Davidman and Howard Swain, Heather Gordon (the reigning Miss Marin County), and film and television star Daphne Zuniga, whose credits include Spaceballs, Nip/Tuck, and Melrose Place. Wait a minute—what’s a Southern California celebrity doing in a 99-seat theater on Sutter Street?

For that matter, how is it that SF Playhouse is giving a West Coast premiere to a playwright of Rebeck’s caliber? Why is it that last year, when Bay Area acting legend Joy Carlin heard the Playhouse was premiering David Lindsay-Abaire’s Kimberly Akimbo (like Rebeck, Lindsay-Abaire is a Broadway/Off-Broadway player), she called to offer herself for the title role? And how is it that SF Playhouse has already racked up such an impressive list of accolades—garnering 20 nominations for Bay Area Theatre Critics Circle awards in its first year alone?

This intimate little company is theater insiders’ best-kept secret; the buzz, though loud, has been limited to those in the know. A few months ago, however, the Playhouse won five Bay Area theater awards in its category (99 seats or less), including Best Actor in a Drama (Oakland-based Cagney & Lacey alumnus Carl Lumbly for Jesus Hopped the ‘A’ Train), Best Original Script (Aaron Loeb’s brutal and timely First Person Shooter), and Best Actress in a Drama (English’s partner and wife, producing director Susi Damilano, for Six Degrees of Separation). It also won two awards for Man of La Mancha, a musical that even more established institutions hesitate to tackle. With this latest slew of commendations, SF Playhouse looks to be at the most thrilling point in a new theater’s life, when it stops being a “phenomenon” and begins to achieve the mainstream success its directors crave.

As Bill English told me recently, “We want to be the intimate, professional alternative to A.C.T.” If that means creating solid productions of classics and exciting new work on a somewhat smaller scale, he and Damilano are approaching their goal. I’ve seen theaters rise and fall—I produced my first New York show almost 20 years ago—and English’s shrewd combination of snagging the overlooked plays of top-drawer writers and mounting reenvisioned, but not quite revisionist, versions of more familiar works has the whiff of a sure thing. The talent in town seems to agree. Jesus Hopped the ‘A’ Train, Stephen Adly Guirgis’s 2000 Off-Broadway hit, crackled with sharp, edgy performances. Man of La Mancha packed a Broadway show into less than half the usual playing space, thanks in large part to a brilliant design by award-winning set designer Melpomene Katakalos.

Most recently, the Playhouse offered audiences the West Coast premiere of Coronado, the first play by New England–based Dennis Lehane, better known for novels like Mystic River and Gone, Baby, Gone, both turned into compelling films. This tiny theater is a talent magnet.

Still, as skillful as SF Playhouse’s work is, is “alternative to A.C.T.” quite the way to put it? It sometimes seems as if the Playhouse wants to be A.C.T., or at least A.C.T. with a slightly younger, hipper demographic. Since we already have A.C.T., as well as the arguably hipper Berkeley Rep (another regional giant), and with arts funding always in such a depressingly downward spiral, do we really need another theater whose mandate is putting on reliable interpretations of mainstream plays?

Maybe we do. During a spate of local theatergoing in February, I saw several plays with flashes of real brilliance, but only one solid production: The Scene.

With English’s polished set, that impressive cast, and an unsurprising but extremely skillful—and very funny—script, the production offered a more completely satis­fying evening than either of the more adventurous works I saw that week. Reliability has a price, though. If the institutional-theater model trickles down to the smaller theaters, where the more adventurous programming usually takes place, that doesn’t bode well for the art form.

This month, SF Playhouse was set to premiere a new version of Faust by San Francisco playwright and director Mark Jackson. Jackson is known for his wildly imaginative theatrical sense, as in his breakout The Death of Meyer­hold and his stunning The Forest War, both of which he wrote and directed for Berkeley’s Shotgun Players. (See “Action, Jackson,” from the December 2006 issue of San Francisco, at sanfranmag.com.) But somewhere along the line, English and Damilano dropped the project. Instead, they’re presenting Tracy Letts’ Off-Broadway smash Bug, a disturbing tale about a lonely woman and a drifting vet who descend into a private hell of delusion, paranoia, and violence in an Oklahoma motel room.

When I asked English about the programming switch, he took pains to tell me that Jackson is “super-talented,” but that the contemporary Faust he’d promised had become “something else,” which “was not a piece that was going to work in our space with our constituency.” “It’s perfect for another theater,” Damilano remarked, “very intellectual and stylized.” And why was Bug chosen to replace it? English said, “I really believe in what it has to say about where we are right now, how afraid we are, how much paranoia is part of our culture.” Then, after a short pause, he added, “And Tracy Letts is the hottest playwright in America right now.”

I don’t mean to suggest that artistic directors should ignore commercial considerations when they program their seasons, or to imply that some lack of artistic courage colored English’s decision. But this issue of absorbing the institutional mindset nags at me every time I want to give the Playhouse an unqualified rave. I wasn’t crazy about Bug when I saw it in New York in 2004. The play was a popular success, and it certainly gives its small cast a chance for some dazzling performances, but the intensity becomes both comic and repellent as the action careens out of control. The film version, starring Ashley Judd, has a similar problem: startling performances undermined by the over-the-top conceit.

I have no doubt that SF Playhouse will present an impressive and entertaining show. I have similar hopes for Cabaret, a show much closer to my heart, which follows Bug at the end of June. And we’re not exactly starved for experimental theater here. I shouldn’t take English and Damilano to task for a promise they never made. They’re successfully creating a polished and intimate alternative to A.C.T., at about half the ticket price, which is exactly what they set out to do.

Dominic Orlando is a writer, producer, and director based in Minneapolis and San Francisco.