The third volume in Stardust, Rod Stewart's sacrilegious series of standards is an improvement, if only because neo-crooner/producer Steve Tyrell puts some swing into the arrangements. A few interesting guests show up: a subdued Clapton on ''Blue Moon,'' a kittenish Bette Midler on ''Manhattan.'' But Stewart still hasn't the faintest idea of how to interpret these beautiful warhorses. Singing at the top of his register, he sounds bizarrely like end-stage Billie Holiday with a crippling hangover.

