John Walsh meets Julia Peyton-Jones. Photographs by Dan Burn-Forti
One image of the Serpentine Gallery in Kensington Gardens sticks in the mind, though the gallery itself isn't in the picture, nor its exhibits, nor its famous artists. It is the photo of Princess Diana that was taken on Wednesday 29 June, 1994, the night her husband Told All to Jonathan Dimbleby. At approximately the same hour that the Prince could be seen on prime-time television in grim, self-exculpatory flow about Mrs Parker Bowles and the sorrow of marital breakdown, his estranged wife was photographed at a gala dinner, looking the antithesis of guilt, grimness or sorrow. She was wearing that black, strapless, knee-length cocktail frock that was later auctioned for thousands in New York, her walk was sassy, her hair was just so, and she never looked more thrillingly sexy.

And her hand was stuck out in front of her, in a long-distance acknowledgement of her host's greeting. She looked genuinely happy to be there amidst friends. By examining the small print you learned that the venue was the Serpentine Gallery and the Princess's greeter was its director, Julia Peyton-Jones. In the papers next morning, every front page highlighted the smiling Princess and down-paged the glum adulterer. And the Serpentine Gallery got lodged in the public mind as the perfect haven for a bolted Royal in search of a sympathetic shoulder.

It is also less sentimentally conceived these days as one of the key venues of modern British avant-garde art, displaying within its tiny exhibition space some of the most notable and infamous sights of recent years: Tilda Swinton asleep in Cornelia Parker's glass box, Ian Hamilton Finlay's crackpot metaphors of battle, the bottled-pee artist, Helen Chadwick's fountain of licked chocolate - and most notably, "Some Went Mad, Some Ran Away", the showcase of modern conceptualism curated by Damien Hirst. It starred Hirst's own spotty-Smartie paintings, his medicine cabinets and his famous pickled-sheep exhibit, entitled "Away from the Flock"; it was (literally) egregious, and was duly vandalised.

Within the walls of the Serpentine Gallery, everything seemed surreal, high-concept, slightly mad. Visiting it one day with a friend, and duly noting the exhibits leaning against the walls, we paused in front of a baby's buggy in the middle of the floor. There was no baby in it, but an empty Coke can rolled about in the plastic tray underneath. I was about 90 seconds into explaining how it was a brilliant double indictment of consumerist nullity (the discarded can) and creative impotence (the poignantly unfilled cradle) when a small Japanese woman emerged from the Ladies with a tiny baby, plonked the infant in the buggy and wheeled the exhibit crossly away.

Julia Peyton-Jones laughs at my story, of which she has heard only about 275,000 variants since she took over the gallery in 1991. She has a sweet laugh, and a warm and friendly demeanour, behind which you can detect a lot of gritty professionalism. Indeed, watching the two sides of the lovely JPJ being presented turn and turn about is an absorbing spectator sport. She is matey but formal, frank but defensive, poised but appalled by nosey enquiries.

Of her suitability as the acceptable face of modern art exhibiting, however, there is no doubt. She is tall and charismatic, and you easily pick her out as the boss from the dozen or so women in the Serpentine Gallery offices, but she also radiates sisterliness and introduces her staff - surnames included - at high speed, as if doing a Madame Memory vaudeville act. Cool, blonde, lipsticked and rather exquisite, she is wearing a black top, a grey skirt - and an old yellow cardigan full of holes. The suspicion that this is a calculated bit of dressing-down is justified by the number of times she alludes to her moth-eaten knitwear. Ms Peyton-Jones may be a brilliant curator in a male-heavy world, and a fund-raiser of dizzying successfulness, but she likes to express a certain hopelessness.

The Gallery has been through a year-long, root-and-branch renovation costing pounds 4m. A pounds 3m Lottery grant from the Arts Council was topped up from money raised by Ms Peyton-Jones through her summer galas, which are sponsored by Vanity Fair and attended by the A-list of the art, acting, media and literary worlds - Steve Martin, Dennis Hopper, Joan Collins, Valentino - drawn by the magnet of the Princess of Wales, who became the gallery's patron in 1993. The re-done Serpentine was to have been opened in September by the Princess. Apart from the shock of her death, the gallery had also been rocked by building disasters. "You see this?" asks Peyton-Jones, holding up a complicated-looking compound of rope and plaster with distaste. "These were the things that held up the dome in the north gallery. When we were putting in the light fittings, the whole dome suddenly slipped by 15 millimetres. Can you imagine?" Her eyes widen, as if the San Andreas fault had suddenly opened beneath her. "We had people in safety harnesses hanging from the ceiling, putting a new support contraption in. It may be a small building, but it is very complicated." Builders and their iniquities now occupy her every waking minute, and will do so until next February, when normal service will resume with an exhibition devoted to the work of Piero Manzoni, one of the European arch-conceptualists of the Sixties. Manzoni's more sophisticated labours will forever be eclipsed by his Merda d'artista series in 1961 featuring 90 tin cans allegedly containing the artist's poo, and costing their weight in gold.

Why choose Manzoni to inaugurate the new-look gallery? Was she trying to legitimise modern conceptualists like Hirst and Rachel Whiteread by finding them an aesthetic godfather? "I don't think Hirst and Whiteread need any legitimising. I mean, both have won the Turner Prize. But art doesn't exist in a vacuum, and it's important to contextualise things. Manzoni was very much a forefather of some of the work that's going on today, and having an exhibition of his work sets the stage in a way."

Did she think the British public understood conceptual art in 1997, or were just less prepared to mock the proteges of Charles Saatchi and Jay Jopling? "I think they're far more open to the whole of contemporary art than was true eight or nine years ago. More positive things are being written about contemporary art, it's being discussed rather than rejected as too difficult, as it used to be. People are more prepared to listen when there's an exhibition of a new artist they haven't come across before." She blew a strato-cumulus of Silk Cut Mild that hovered above us like a promise of rain. "It's about information, I think. People want to be well informed about art now, as they want to be about fashion, film, books, the latest, the newest."

Did she think (as a remarkable Channel 4 discussion programme tried to debate on the night of the Turner Prize) that painting had become terminally passe? She blinked. For a moment her poise deserted her. "No, I think that's absolute nonsense. I - I find it such a ludicrous question, it almost leaves me speechless. Painting is perfectly alive and well, it's just being re-shaped at the moment. What has happened is that different art forms have evolved so that it's no longer quite clear what a sculpture is, what a film is, what a photograph is. But painting has kept more rigidly to its structure than other forms, and there are fewer people experimenting with the idea of painting than there are sculptors experimenting with three-dimensional form."

But if you were 18 again, and you looked at the artworks that won prizes, and went on show at the Venice Biennale, and were exhibited at the Serpentine Gallery, wouldn't you conclude there's a prejudice against painting? "No, no. What has happened is that painting has come off the canvas and can take numerous different forms. If you're trying to express colour and shape and form, it doesn't have to be done with brushes and oil paints."

These meagre tools were, however, the ones with which Julia Peyton Jones started her career. They were in the genes. Her great-grandmother was a painter, her grandfather an art historian. Julia grew up in a flat in Victoria, London, "just behind the Army & Navy Stores". Her father ran an insurance company; her mother was a housewife. She had one sister but inherited four half-sisters when her father took a second wife and moved into a Kensington house once owned by Samuel Palmer, the English visionary artist. Did she admire him? "Not particularly. I was very curious about him. When I was growing up I had fantasies about meeting him." She remembers seeing the Serpentine Gallery when walking in Kensington Gardens as a child. (It was built in 1934, started life as a tea-room and became a gallery in 1970). She remembers going to exhibitions there in the mid- Seventies ("I remember the David Smith exhibition. And Paula Rego's little girls. I remember walking in and being absolutely amazed") although she greets with understandable puzzlement the idea, then current, of choosing shows by committee.

A "sullen and boring" teenager, a quondam flower child, she spent seven years at the Royal College of Art, before becoming a lecturer at Edinburgh School of Art. "Being a student then was completely different from being one now. The persona of the artist isn't what it is now. The cult of personality thing didn't exist." Her own painting, meantime, was developing into abstraction, although she is typically reluctant to discuss her own work. Huge 12-foot canvases gave way to small drawings or went on to become films. "They were notations, marks that are difficult to decipher, like shorthand squiggles if you don't know shorthand or music notes if you can't read music. Something that you can't understand which then becomes an art object of intrigue in its own right."

She wrestled with a dozen different forms between 1974 and 1989 before giving up art for good. "I had a big clear-out," she observes laconically. "The whole point about being an artist is that you have to have something to say. There has to be a reason for going into a studio that impels you to put aside the time. I don't have that desire, so I don't do it. And you can't just languish and wish that you still did it, because that's just horrible." Pressed to describe the walls of her Islington living- room, she concedes that she has "a couple of my things" hanging there, alongside a William Turnbull and "some pictures of my grandmother's". Otherwise, her life has been focused on the Serpentine Gallery since she walked into the job in 1991. Under her care, it flourished like never before. Yearly attendance figures doubled to 363,000. When her five-year tenure ran out in 1996, it was (unprecedentedly) renewed on the spot.

She is often credited with introducing Princess Diana to the Gallery. In fact it was two of the trustees who brought the Princess to inspect the arty conservatory in her Kensington backyard. She came to the gala dinner in 1993, and a firm relationship was established. Ms Peyton-Jones is stiffly determined to play down any suggestion of girlish complicity between the traumatised fashion-plate and the cool art impresario eight years her senior. Ask her what they talked about, how they bonded, which artists interested Diana most, and Ms PJ clams up. "It was just one of those occasions where, in the ebb and flow of conversation, the significance of what was said at the time gets lost ..." Did she, Julia, get invited to Kensington Palace for a chat? "No. She was very close to the gallery but we had a totally professional relationship." When she died, didn't you feel you'd lost a friend as well as a patron? "If you're asking, was she a personal friend, absolutely not." And then you look at Ms Peyton- Jones, with her hair in three shades of blonde, at her glittery eyes glancing covertly at you from beneath a pale ridge of brow, at the set of her mouth and the gleam on her platinum and gold earrings, and you think, absurdly: so how come you've turned into her?

When the builders are placated and paid off, the grand re-opening celebrated, and Piero Manzoni duly re-considered by the critics, Ms Peyton-Jones's life will be on an even keel once more. The gallery's exhibitions are booked up to the end of 1999. Unless some enterprising arts body snaps her up (the V&A? the ROH?), she will continue parlaying into the next millennium her platinum glamour and holey-jumper charm, the kind that extracts money from sponsors and drags the idle middle-class Philistine to a close engagement with aesthetic thought. Meeting Ms Peyton Jones is a bit like a builder encountering her gallery: you find a winningly sweet exterior that conceals a lot of tough and knotty underpinning - which occasionally slips, just a few millimetres.