OBJECTIVES: I. Determine the local recurrence rate, disease-free survival, and overall survival of patients with stage II or III rectal cancer treated with neoadjuvant radiotherapy and fluorouracil followed by surgical resection and adjuvant fluorouracil and leucovorin calcium. II. Determine the toxicity rate in patients treated with this regimen. III. Correlate failure-free survival with ultrasound-determined preoperative staging in patients treated with this regimen. IV. Determine the quality of life of patients treated with this regimen. V. Determine if toxicity due to treatment, daily stool frequency, sexual dysfunction, and disease-free survival correlates with quality of life parameters in patients treated with this regimen. VI. Correlate clinical selection criteria with ability to perform sphincter-sparing surgery in patients treated with this regimen. VII. Determine post-chemoradiotherapy pathological response, margin status, and lymph node status and correlate these factors with initial clinico-pathologic findings in patients treated with this regimen.

OUTLINE: Patients undergo pelvic radiotherapy once daily five days a week for 5 weeks followed by boost radiotherapy twice daily for 7 days. Patients also receive neoadjuvant fluorouracil IV continuously over days 1-4 and 36-40. Patients undergo surgical resection 4-6 weeks after completion of radiotherapy. At 4 weeks after surgery, patients receive adjuvant leucovorin calcium IV and fluorouracil IV once daily five days a week. Treatment continues every 4 weeks for 4 courses in the absence of disease progression or unacceptable toxicity. Quality of life is assessed at baseline, at the completion of pelvic and boost radiotherapy, at 4 weeks after completion of chemoradiotherapy (prior to surgery), and then at 3, 6, and 12 months after completion of study therapy. Patients are followed every 3 months for 2 years, every 4 months for 3 years, and then annually thereafter.

PROJECTED ACCRUAL: A total of 23-41 patients will be accrued for this study.

DISEASE CHARACTERISTICS: Histologically confirmed adenocarcinoma of the rectum Tumor extending through bowel wall (T3) OR Fixation to surrounding structures (T4) OR Nodal involvement by endorectal ultrasound (N1-2) Tumor extending through bowel wall but not fixed (T3) must be: At least 4 cm or at least 40% of bowel circumference OR Accompanied by nodal involvement Evidence of transmural penetration confirmed by 2 of the following: CT scan Pelvic MRI Transrectal ultrasound Physical exam Proximal extent of tumor must not extend higher than 12 cm above denate line and must be below pelvic peritoneal reflexion or sacral promontory Regional lymph node involvement allowed No distant metastases by CT scan of abdomen and pelvis or chest x-ray

PATIENT CHARACTERISTICS: Age: Over 18 Performance status: ECOG 0-1 Life expectancy: At least 2 years Hematopoietic: Leukocyte count greater than 4,000/mm3 Platelet count at least 100,000/mm3 Hemoglobin greater than 10 g/dL Hepatic: SGOT and SGPT less than 1.5 times normal Bilirubin less than 1.5 mg/dL Renal: Creatinine less than 1.8 mg/dL Other: Not pregnant or nursing Negative pregnancy test No other prior or concurrent malignancy within the past 5 years except inactive non-melanoma skin cancer or carcinoma in situ of the cervix No psychiatric condition that would preclude informed consent No other serious medical illness that would limit survival

PRIOR CONCURRENT THERAPY: Biologic therapy: Not specified Chemotherapy: No prior chemotherapy for rectal cancer Endocrine therapy: Not specified Radiotherapy: No prior radiotherapy for rectal cancer Surgery: No prior surgery for rectal cancer except diagnostic biopsy