''If this thing were real, there would be broken bones all over the place,'' said Al Komjathy, an aide to the sponsor of the bill, Senator Francis J. McManimon, Democrat of Hamilton. ''Its entertainment. It's illusion.'' Such admissions, however, fly in the face of a longstanding fiction, a willing suspension of disbelief by millions of wrestling fans. The bizarrely clad giants who perform drop-kicks, flying body presses and a maneuver known as a ''chicken wing'' (sometimes called a ''hospitalizer'') in arenas and on television publicly maintain that they are engaged in real combat. Their groans, grunts and hollers, they say, are true expressions of rage.

Under the legislation, the state's Athletic Control Board would no longer license wrestlers, promoters, timekeepers and referees. The wrestlers would no longer be required to take physical examinations before an exhibition.

The bill, which still must pass the Assembly, would also remove the state tax on television rights.

The World Wrestling Federation asks in the legislation that professional wrestling be defined as ''an activity in which participants struggle hand-in-hand primarily for the purpose of providing entertainment to spectators rather than conducting a bona fide athletic contest.''

Pretty Boy Larry Sharpe, a 38-year-old wrestler with bleached hair and a 260-pound frame, who operates the Monster Factory, a school for would-be wrestlers in Paulsboro, is not so forthright. ''Some say it's real,'' he said, ''some say it's a show, but if you don't know I am not going to tell you.'' Screeches of 'Pain'

Mr. Sharpe recalled with an epithet the person who shattered his childhood illusions of Santa Claus, and said he certainly would not inflict such pain upon fans of professional wrestling.