SITTING in the tiny auditorium for the first time, looking across the even smaller stage, Sylvia Crathorne was confronted with a theatrical giant. And the experience was the start of a life-long love affair with one of Britain's most historic and important theatres.

"The first time I ever came to the Georgian Theatre I saw Dame Sybil Thorndike, who was appearing with Barbara Jefford in 1965, doing a series of readings," she says.

"It was absolutely magical, I was bowled over. And in this theatre, the audience is part of the show, it creates an intimacy that is completely unique. It was then I fell in love with the theatre."

The performance may have been more than 30 years after Dame Sybil created the title role in George Bernard Shaw's Saint Joan, but, even at the age of 83, she was still touring, and still dazzling the audiences.

Now, another 30-odd years on, the seeds sown by Dame Sybil's visit to the North Yorkshire market town of Richmond are helping shape plans to secure the future of the Georgian Theatre Royal.

And, as chairman of the theatre's trustees, Sylvia, Lady Crathorne, is aiming to repeat the success of her mother-in-law, the first Lady Crathorne, who helped restore it in the 1960s after more than a century of neglect.

"She threw all her energies into it. She was an artist before she got married and she had always loved the arts and the theatre," says the present Lady Crathorne. "She recognised how important it was, both from the point of view of the theatre and the theatre world, and for Richmond."

When the theatre was built, in 1788, it was just another small stage when almost every market town had one. It was one of a string of theatres built by Samuel Butler, an actor who ran his own touring company. He also built theatres in Whitby, Northallerton, Beverley, Kendal, Harrogate and Ripon.

Every August, Butler's company arrived for a six-week residency in Richmond, before moving to Whitby for the winter. Performances ranged from circus skills to plays but, apart from those six weeks, timed to coincide with race meetings at the town's racecourse, the theatre was unused.

The capacity then was 400; the more comfortable boxes were available at three shillings, seats in the pit at two shillings and the often rowdy gallery, which occasionally had to be closed by the town's magistrates when things got too out of hand, at a shilling.

"There would not be any chairs, of course, they would all be on benches and they would not be padded," says theatre manager Bill Sellars. "The benches in the pit would go from wall to wall and people would clamber over each other to get to their seats. It would be hot and sticky and smelly and smoky. The black smoke from the tallow candles meant the atmosphere would have been unbelievable, and there were no toilets, of course. There was only one way out for all 400 people, so if there was a fire or some other disaster, it would have been absolute panic."

Fire restrictions, and demands of a modern audience, mean capacity is down to 186, although another 28 seats with restricted views can be provided for popular shows.

When Richmond's theatre was built, it was one of about 350 Georgian playhouses around the country, all in a similar design and shape. Now, it is the only Georgian theatre left in its original form.

But, until about 40 years ago, few people knew the Victoria Road building had been a theatre at all. After its heyday under Butler, and then his son, theatre-going fell out of fashion and, in 1848, the theatre closed, and ownership passed to the town council, ushering in more than a century of a decidedly undramatic use, as an assembly room, an auction room and a store house for a corn merchant, with wine barrels underneath the stage.

"It wasn't used as a theatre again for more than 100 years and, eventually nobody realised it had ever been one, says Mr Sellars. "But in the late 1950s they started to investigate and paint scrapings revealed odd letters on the boards around the auditorium."

The letters turned out to be the names of playwrights, including Goldsmith and Sheridan, with prime position on the board facing the centre of the stage going to Shakespeare. Restoration work managed to preserve the panel bearing Shakespeare's name, an original from 1788, as well as two decorative panels and a number of plain ones. Further work also revealed three trap doors in the stage, including one with its original runners.

Some of the original boards were still in place on the stage - considerably wider than their restored cousins - boards that would have been trod by the first of the great players on the British stage.

As an 18-year-old, Edmund Carey had been a member of Butler's company, before going to seek wider acclaim in London. When he returned to Richmond, it was to give a charity performance under his new, and by then hugely celebrated, name of Edmund Kean.

It was when these discoveries were made that the first Lady Crathorne took up the cause of restoring the theatre, with work beginning in 1960. But, even though that has seen the playhouse through almost 40 years of drama, the trustees realise that now is the time for it to have a fresh look.

A scheme costing £1,000,050 has been put together, which will see the auditorium restored, the cramped backstage area refurbished and the lighting and sound improved. The 1960s extension, which houses the bar, caf and cloakrooms, will be demolished and replaced, and a lift will make the theatre properly accessible to wheelchair users for the first time.

An application for planning permission for the scheme will be lodged a week on Monday, and a substantial part of the cost has already been pledged, with a £575,000 award from the National Heritage Lottery Fund conditional on finding matched funding and approval for the proposals.

International bankers Brown Shipley, well known for their support for the arts, have promised a £100,000 donation, leaving the trustees having to make up about £375,000 through a public appeal and help from charitable trusts.

"It is a fantastic challenge and, in a sense it is a theatre project, but it is also important for Richmond," says Mac Bryant, who is running the fund-raising campaign. "It will help the economy and that is why local businesses and groups are so supportive, they see how important it is for the future of Richmond."

And for Lady Crathorne, herself the daughter of 1930s and 1940s film actress Jane Baxter, it is an opportunity to preserve the tiny theatre, and maybe provide inspiration for future generations.

"Whatever happens, this theatre has to be looked after and improved for the next 40 years," she says. "It has an extraordinary intimacy and it is a true theatre. Sybil Thorndike said it was like performing inside the box of a cello - it is such a magical place."